Illegal aliens crossing U.S. borders by the thousands must be stopped, Attorney General William French Smith said yesterday, as he told congressmen the administration will endorse bipartisan legislation to impose fines on employers who hire them.

The proposal has wide support in the joint Senate and House subcommittee hearing where Smith testified, but there are questions about how such legislation could be enforced.

The subcommittees are considering a major reform of the nation's immigration laws and are focusing on a bill drafted by the two subcommittee chairmen, Sen. Alan K. Simpson (R-Wyo.) and Rep. Romano L. Mazzoli (D-Ky.). Their bill is not identical to the one submitted by the Reagan administration, but the differences are more detail than substance. It would impose fines of $1,000 to $2,000. Smith urged harsher penalties for repeat offenders.

Smith said there are currently between 3 million and 6 million aliens in the country illegally. Malcolm Lovell, undersecretary of labor, testified that illegal aliens are taking a significant number of jobs away from Americans. He said that in 1981, 30 percent of all workers in this country--29 million--were holding low-skill jobs typically taken by illegal aliens. He added that the displacement is not limited to the lower paying jobs, but to high paying blue-collar jobs, such as construction, as well.

Smith opposed a provision in the Simpson-Mazzoli bill to require the government to develop a counterfeit-proof national identification card within three years of the time the legislation becomes law. Employers would be required to check the card before hiring a prospective employe. He said developing the system is expensive and he wants to be sure first that counterfeiting would not be a major problem.

The concept of a national identification system has been attacked by special interest groups on both the left and the right who fear it could eventually aid in police oppression.

AFL-CIO President Lane Kirkland supports both the proposal for employer penalties and the identification system.

Smith recommended that businesses with four or fewer employes be exempt from the bill because of the cost of enforcement. He said such small firms make up 50 percent of the companies in the country and only 5 percent of the work force.

He also urged the subcommittees to include a provision that the president requested last year: establishing special powers to deal with immigration emergencies, such as the 1980 Cuban boatlift when 125,000 refugees came into the United States within a few weeks.

"The United States must never again permit its immigration policy to be set in Havana or any other foreign capital," Smith said.

The bill would set an annual ceiling of 425,000 legal immigrants, including 40,000 each from Canada and Mexico. It would also give permanent resident status to illegal aliens who entered the United States before Jan. 1, 1978. The administration wants the eligibility date changed to Jan. 1, 1981.