Thousands of Southeast Asian refugees throughout California are collecting welfare benefits while illegally earning thousands of dollars a year in a vast underground economy, an investigation by The Times has found.
From garment sweatshops in the San Gabriel Valley to weekend swap meets in Orange County, from makeshift electronic assembly shops in San Jose to small truck farms that dot Fresno County, an estimated 25% of California's refugee families are supplementing welfare payments with, in some instances, as much as $25,000 a year in unreported income.
This refugee underground economy is not only costing the government millions of dollars in welfare fraud and lost tax revenues but has helped to create the highest welfare dependency rate in the nation for Indochinese refugees.
More than 10 years after the United States opened its doors to Southeast Asians fleeing war and persecution, 50% of California's estimated 400,000 refugees, making up 43,500 families, are fully reliant on welfare, according to the state Office of Refugee Services.
Government officials and private resettlement workers acknowledge that as many as half of these welfare-dependent families have one or more members working illegally in the underground economy.
'It's a Survival Thing'
"The underground economy is there," said Joan Pinchuk, the coordinator for refugee services in Los Angeles County. "It's a survival thing. They want to do well for their families, and how can you blame them?"
"The underground economy is quite extensive here," said Ernest E. Velasquez, assistant director of welfare eligibility for Fresno County. "How extensive? I cannot say exactly. But it's a real problem for us."
"We see it every day, but it's not something we like to discuss," said Peter Daniels, an assistant director of the International Institute, a Los Angeles County private resettlement agency. "The underground cash economy permeates the system, particularly among the large refugee families. I would say at least half are working for under-the-table wages."
The chief of the state's Office of Refugee Services, Walter Barnes, who is based in Sacramento, said officials at the local level have complained to him about an underground refugee work force in their communities.
But because the network is organized along extended family and ethnic lines and the workers fear detection, Barnes said, it is difficult to gauge the extent of the illegal activity.
"I'm fully aware of the stories, and I certainly acknowledge the existence of an underground economy for refugees," Barnes said. "At the same time, I haven't received any hard evidence to indicate that a significant percentage of refugees are working illegally. I don't think it's any more or less than other welfare recipients."
However, county officials and private resettlement workers emphasize that participation in the underground economy by refugees on welfare is pervasive and that a reason for the lack of hard evidence is that refugees are seldom caught.
County welfare fraud bureaus do not have enough agents to penetrate such an economic network, and in some instances county welfare caseworkers have looked the other way when they have encountered fraud.
Several caseworkers who are Indochinese said they frequently know when a Southeast Asian family is earning cash from an undocumented job. But almost always they choose not to investigate, citing cultural reasons and the difficulty of making a successful case against a family.
One caseworker said it is an unwritten law in the Vietnamese community that "you don't mess with somebody's rice pot."
Refugees say legitimate but low-paying jobs for which some have been trained hold little attraction when they can take in considerably more by combining welfare benefits, Medi-Cal and the unreported cash from illegal jobs.
The underground economy thus has given Southeast Asians, who make up 90% of the state's refugee population, a compelling reason to remain on welfare for several years. State studies show that nearly three out of every 10 refugee families on public assistance in California have received aid for a period ranging from four to 10 years, raising the possibility that a permanent welfare class has emerged within the state's Southeast Asian community.
In Los Angeles County, where the underground economy is most extensive, the cost of welfare payments to refugees who have been here three years and more and continue to receive welfare has risen dramatically, from $384,000 in 1981 to $4.6 million this year.
'A Very Hard Life'
"The refugees who come over here have a very hard life," explained one Vietnamese man whose wife works in a garment factory near Los Angeles while the family collects $950 a month in cash assistance and food stamps. "We know what we are doing is illegal. But it is something many of us have to do to survive. The war has taught us this."
The refugee underground economy exists in other states but nowhere near the extent that it does in California, according to resettlement officials. This is mostly the result of fewer Indochinese living outside California who are dependent on welfare and therefore enticed by underground jobs.
Federal, state and local cash assistance to refugees in California amounts to more than $2.7 billion over the past 10 years. The money thus lost to welfare fraud could extend to hundreds of millions of dollars, officials concede. And this would not include income taxes uncollected from the workers and unemployment, Social Security and workmen's compensation taxes uncollected from the employers.
Private resettlement workers and county officials say the formation of a clandestine refugee work force in California underscores a failure on the part of federal, state and local agencies that oversee refugees and help them become self-sufficient.
An Orange County social service official, Wayne Warner, acknowledged that job training and job placement programs have failed to serve a large number of refugees. Warner and county administrators statewide say the programs--designed for the state's indigenous poor--do not have the staff, the funding or the type of services required to place a diverse population of Southeast Asians in jobs that will lead to self-sufficiency.
Others blame a bureaucracy that refuses to confront the problem for fear that it will become a pretext to cut back refugee services.
"Frankly, we are afraid of the consequences of going public, afraid that it might become fodder for the Reagan Administration," said Robyn Ziebert, who until recently worked for the Pacific Asian Consortium in Employment, a Los Angeles-based group that assists refugees in finding jobs. Ziebert now works for an international group aiding refugees in El Salvador.
'Are Deeply Committed'
"This is a very emotional program, and we are deeply committed to refugees. But there are things that are happening (such as the underground economy) that we just can't live with anymore."
The existence of a refugee underground economy in California has national impact. The state's 400,000 Southeast Asians represent 40% of the nearly 1 million Southeast Asian refugees who have been resettled in the United States since the fall of South Vietnam, Cambodia and Laos in 1975. Among them are many poor and rural families whose perilous flight across the South China Sea made them known to the world as "the boat people."
In many ways, the labor underground is the story of how the "boat people" have fared since leaving refugee camps in the Philippines, Malaysia and Indonesia and beginning a new life in America. It illustrates how higher welfare benefits coupled with the promise of underground jobs help to serve as a powerful magnet to California, luring one in every four Indochinese refugees who are initially resettled in other states.
It helps explains the motives of a people who have taken a strong work ethic and built a remarkable economic system to cushion against poverty, a system that stretches legal and illegal dollars by pooling resources and living as extended families.
Finally, it provides one answer to a question that has long confounded researchers studying the most expensive and ambitious resettlement program in U.S. history: Why, in California, do so many Southeast Asian refugees on public assistance exhibit so little motivation to leave the welfare rolls?
"The mathematics are real easy," explained Daniels of the International Institute. "The jobs we have for refugees pay $4 and $5 an hour. A family of seven is making $1,032 a month in welfare. We can't compete with welfare, much less welfare and the illegal income they're earning."
The resettlement of Southeast Asian refugees, since it first began in 1975, has spawned a nationwide debate over the role of public assistance and its potential for creating long-term welfare dependency.
Upon arrival, refugees are eligible for the full sweep of public assistance, including Aid to Families with Dependent Children (AFDC), food stamps, Medi-Cal and a cash assistance program designed specially for refugees who are single or married and without children. Only this last program has a time limit. In addition, refugees are eligible for vocational and language training and job placement services.
Concern Over Studies
Since 1981, Congress and the Reagan Administration have expressed concern over studies concluding that California's Indochinese refugees lag far behind those in other states in achieving economic self-sufficiency.
A nationwide survey by the federal government in 1983 revealed that welfare dependency rates for Southeast Asians living outside California dropped by one-third after two years of residency. In California, the dependency rate stood virtually unchanged.
Fully one-fourth of the California refugees who arrived in 1975 lived in welfare homes eight years later. For the rest of the nation, the figure was 9%. Today, California's 50% welfare dependency rate for Southeast Asians stands at double the corresponding rate for refugees in Massachusetts, the next highest state.
Officials at the Office of Refugee Resettlement, the federal agency established in 1980 to oversee refugee affairs, have criticized what they perceive as an apparent lack of work ethic among much of California' Southeast Asian population. The blame has tended to focus on state's welfare benefits, which are 65% higher than the national average, as the major disincentive to work.
But the existence of an extended labor underground contradicts these conclusions. It undermines federal programs that in the past three years have brought $80 million in aid to California counties to train and assist refugees in finding jobs.
"Work in an underground economy has no doubt limited the population of refugees we can serve with job training and job placement money," said Pinchuk, the refugee coordinator for Los Angeles County. "They're simply not as receptive to services designed to get them off of welfare as they might be in other states."
Refugees working in the underground economy have come to symbolize what sociologist Robert Bach and other experts see as a unique marriage between the state's welfare system and the strong Asian work ethic.
"They have found a way to participate in both," said Bach, a professor at State University of New York at Binghamton who studied California's refugee underground economy. "It's a new twist to the century-old pattern of immigrants combining multiple incomes and shared living arrangements as a way to survive.
'Not Getting Rich'
"The majority are not getting rich off this work. It means that maybe they're able to send their children to college, to buy some goods that might ease their lives."
The underground economy, while pervasive, does not fully explain why welfare dependency rates for Southeast Asians in California are so high, Bach and other experts say.
They point out that California has a disproportionately high number of refugees from the "second wave," those who came after 1979 with large families and few job skills. The Hmong, for instance, have an average of 10.5 children per family. Even without an underground economy, scholars say, there is little chance the most unskilled of refugees would be employed in legitimate jobs and independent of the welfare system.
Nowhere is the underground economy more extensive than in Los Angeles County. Refugees attribute this to the confluence of two factors: the nation's largest concentration of welfare-dependent Indochinese and a thriving garment and restaurant industry that has welcomed them as the newest work force.
A dozen refugees in underground jobs in Los Angeles County told The Times that 50% to 75% of the refugees they know on public assistance also earn unreported cash wages in side jobs. These figures were supported by several garment shop owners who employ refugees and by refugees who have family members working illegally.
Of the estimated 100,000 Southeast Asians living in Los Angeles County, 50,000 collect full welfare benefits, according to county figures. More than seven out of 10 refugees on welfare have been here for three years and more. This figure is important because the federal government stops its full welfare reimbursement for refugees after three years, requiring the state and counties to contribute 50% from that point on.
The underground economy has had a profound impact in some communities. The western San Gabriel Valley is home to an estimated 30,000 ethnic Chinese from Vietnam, one of the nation's largest such communities, and supports its own growing version of a Little Saigon. This includes a burgeoning and highly mobile garment industry that has followed the refugees in their migration to the suburbs of Monterey Park, Rosemead and San Gabriel.
In a three-square-mile area, a dozen homes and garages and empty storefronts have been converted to garment sweatshops where Southeast Asian men and women on welfare work long hours for cash wages that rarely exceed $30 a day. Some of the shops operate brazenly, their front doors opened to reveal refugee men and women crowded together and hunched over sewing machines and steam irons. Others are well-hidden amid quiet residential neighborhoods, their activity given away only by racks of bright pink dresses and blazers visible from the street.
Save Money by Walking
"When I first came to the United States, we rode the bus to Chinatown and worked in the sewing factories there," said a Vietnamese garment worker who lives with her husband and two children in a welfare household in Monterey Park. "Now, we can keep more money because we can walk to work."
She said Vietnamese men and women who could not find a family member to watch over their young children often worked out of their homes. She said the better-skilled seamstresses earned between $8,000 and $10,000 a year in cash on top of their welfare payments.
But because wages are calculated by the piece and not by the hour, some refugees are earning far below the minimum wage. In one extreme example, a teen-age refugee girl was paid $45 in cash for 80 hours of piecework sewing. The teen-ager said she did not complain because she was an inexperienced and slow seamstress and any income on top of welfare was considered by her parents to be a bonus.
"I know it's hard and very little pay, but I don't know how to speak English so I do that job," she said.
The Taiwanese owner of the shop admitted that he paid the teen-ager and other workers substandard wages.
"I know, I know. I'm breaking every one of those rules," he said as a reporter pointed to the poster inside the shop that detailed state provisions governing wage and working conditions.
"If I followed the rules, I'd be broke in three months. You'd come back and the doors would be closed," he said. "In this business, because the manufacturer pays us by the piece, we have to find shortcuts. The workers understand this."
Refugees hired by private resettlement agencies to develop legitimate jobs in the Southeast Asian community say the most lucrative work in the underground economy is for women trained as beauticians and manicurists.
"I know several women who are working out of their homes or beauty salons," said a local refugee jobs developer who requested anonymity for fear of being ostracized. "They are making between $1,500 and $2,000 a month while their other hand is collecting welfare."
Several county eligibility workers interviewed by The Times said they often know--and ignore--when a refugee client is engaging in welfare fraud.
"When I know a client is working and not reporting the income, I forget about it," said one Vietnamese refugee caseworker, reflecting the views of her colleagues, none of whom would allow their names to be used. "I don't say anything because what they're making is usually not that much."
In the San Joaquin Valley, on small plots of leased farmland, Hmong welfare families plant and harvest fruits and vegetables sold in ethnic markets. They begin before the sun rises and work well past dark, fathers and mothers and children as young as 5 years old, picking and packing Chinese bitter melon, snow peas, Thai eggplants, cherry tomatoes and strawberries.
Since 1980, more than 16,000 Hmong have migrated to Fresno County, many of them from cities in the East and Northwest where they were initially resettled. County officials estimate that 90% of the Hmong, an illiterate village people from the highlands of Laos, subsist on welfare.
Bill Smittcamp, who packs and processes strawberries harvested by 40 Hmong growers, said three extended families compose a work force of 1,000. Smittcamp said he has turned down requests from growers who wanted payment in cash so they could hide the income from county welfare. Instead, Smittcamp said, he issues checks to the growers. But, he said, they periodically ask him to write the check to a person other than themselves. This person, typically a relative no longer eligible for welfare, is used as a "front man" to cash the check, Smittcamp said.
Other Central Valley packers described similar subterfuge employed by their Hmong growers and workers to conceal income from welfare investigators. They said some Hmong had earned enough underground profits from farming to purchase trucks and equipment and lease additional land.
County welfare investigators confirmed that the widespread camouflaging of income described by the packers had enabled Hmong growers to elude prosecution for welfare fraud.
"The very nature of pooling resources and sharing along communal lines makes it difficult to catch them," said Ray Cereghino, senior welfare fraud investigator for Fresno County. "We can't use traditional means to track the money because they don't use bank accounts. When we go out to make inquiries, you end up talking to the brother or the sister or the cousin of the person you're inquiring about."
Unannounced Visits to Homes
Last year, after receiving complaints from the public that Hmong were working in an underground farming economy, the county Department of Social Services began making unannounced visits to the homes of Hmong welfare clients. But the visits had to be halted in the face of numerous death threats to eligibility workers and bitter protest from the Hmong community.
"We felt they were singling out Hmong," said Tony Vang, a spokesman for Fresno's Hmong community. "We had a meeting with welfare officials and 1,500 Hmong attended. Now, before they visit, they notify us in advance."
For many years, refugees in Orange County and the so-called Silicon Valley in the San Jose area could count on the electronics industry to provide a steady flow of cash jobs. But in the last year, the market for personal computers has collapsed, prompting several firms in both regions of the state to shut down or scale back their operations.
Refugees in San Jose said cash jobs still exist in the electronics field but that the work is unsteady. Until the industry picks up again, refugees on public assistance say they have taken jobs in restaurants and sewing factories and as operators of lunch wagons.
In Orange County, hundreds of refugees work every Saturday and Sunday for cash wages at two large swap meets. "Nobody gets caught," said one swap meet worker, a Vietnamese teen-ager whose family was resettled in 1975 and remains on welfare. "This is America. This is a free country."
FOUR TIERS OF THE REFUGEE BUREAUCRACY FEDERAL GOVERNMENT State Department
Establishes quotas for refugee entrances.
Allocates money for initial costs of resettling refugees. Dept. of Health & Human Services: Office of Refugee Resettlement
Proposes and implements national policies affecting refugees.
Allocates money to states and localities for job and English language training, job placement and other support services. STATE GOVERNMENT Office of Refugee Services
Administers job and English language training programs and job placement programs directly and through local service providers.
Oversees cash and medical assistance to refugees.
Oversees the Refugee Demonstration Project--a three-year California pilot program intended to help newly arrived refugees become independent of the welfare system. COUNTY LEVEL County Department of Social Services
Provides welfare payments to refugees.
Responsible for sanctioning refugees who refuse to participate in training or job placement programs. County Refugee Coordinator
Oversees job training and job placement programs at the local level.
Contracts services to local agencies. FRONT-LINE AGENCIES Voluntary Resettlement Agencies
First stop for refugees entering the country. These private and public agencies provide food, shelter and clothing during the first 30 days of resettlement. Central In-take Unit
A private agency that serves as a clearinghouse for services and a second stop for refugees. Refugees are tested for job and language skills. Those determined to be job ready are sent directly to private agencies for job placement. Refugees in need of further training are sent to appropriate programs. Local Service Providers
Private and public agencies on contract to counties to provide training and job placement. This is the front line of contact with refugees.
COUNTING REFUGEES U.S. and state estimates of the number of Indochinese refugees who:
Were resettled in U.S. since 1975 1,000,000 Were resettled in California 400,00 Collect state welfare 200,000 Are in L.A. County 100,000 Collect welfare aid in L.A. County 50,000