Will stopping immigration cause labor shortages?

Based on a broad consensus among economists, empirical studies, and historical data, stopping or severely restricting immigration does cause significant and persistent labor shortages.

While proponents of immigration restrictions often argue that limiting foreign labor will force employers to raise wages and hire native-born workers, real-world evidence shows that the primary results are unfilled jobs, delayed projects, business contractions, and higher prices for consumers.

The connection between restricting immigration and labor shortages is driven by several key factors:

1. Demographic Realities (Aging and Declining Birth Rates)

Most developed countries, including the United States, are facing an aging domestic workforce and declining birth rates.

•Workforce Stagnation: In the U.S., Baby Boomers are retiring in massive numbers, and deaths are projected to outpace native-born births in the coming years.

•Immigration as a Growth Engine: Over the last few decades, immigrants have accounted for roughly half of U.S. labor force growth. Without immigration, the total pool of available workers stagnates or shrinks, making widespread labor shortages mathematically inevitable.

2. High-Exposure Sectors

Certain vital industries are disproportionately reliant on foreign-born labor because domestic workers are either unavailable or unwilling to take these roles. The foreign-born workforce makes up a massive share of critical occupations, including:

•Agriculture & Food Systems: Over 60% of farmworkers are foreign-born. When immigration slows, crops are often left to rot in fields.

•Construction: Immigrants make up over a third of the construction workforce. Reductions in this labor pool directly halt or delay home construction, worsening housing shortages and driving up real estate costs.

•Healthcare & Elder Care: As the population ages, demand for home health aides and nurses has surged. Immigrant labor heavily supports this sector, and shortages directly limit access to care.

•STEM & Tech: High-skilled immigrants drive innovation, entrepreneurship, and productivity in fields like software engineering and advanced manufacturing.

3. The "Complementary Worker" Effect

A common economic misconception is that native-born and foreign-born workers are perfect substitutes (i.e., if an immigrant leaves, a native-born worker simply steps into their spot). In reality, they are often complements.

•Many businesses operate in mixed-skill teams. For example, if a construction company cannot hire basic laborers (often immigrants) to lay a foundation, it cannot employ highly paid native-born plumbers, electricians, or supervisors because the project never begins.

•A National Bureau of Economic Research (NBER) study found that for every six jobs lost by undocumented male workers due to enforcement, one native-born worker with a high school education or less also loses their job due to team disruptions.

4. What Happens to Wages and Automation?

The classic counterargument is that restricting the labor supply will cause wages to rise. While minor, short-term wage increases can occur in highly localized sectors, long-term economic data indicates that this theory rarely plays out as intended.

•Business Scale-Backs: When faced with a severe labor shortage, companies do not simply "raise wages indefinitely." Instead, they frequently scale back production, cancel expansion plans, under-invest, or shut down entirely.

•Offshoring and Automation: If local labor becomes unavailable or too expensive, larger firms often offshore operations to other countries or rapidly automate tasks, which can permanently eliminate jobs for native-born workers.

•The 1920s Lesson: When the U.S. enacted sweeping immigration quotas in the 1920s, cutting immigration by 80%, economists found it did not boost wages for native-born workers. Instead, wages for native-born workers actually fell because the sudden lack of labor caused regional economies to contract and transition away from labor-heavy operations.

5. Macroeconomic Ripple Effects

When immigration drops sharply, the contraction of the labor force has broad economic consequences:

•Slower GDP Growth: Federal agencies and nonpartisan think tanks (such as the Congressional Budget Office and the Peterson Institute) warn that restricting immigration significantly reduces real GDP growth.

•Inflationary Pressures: When companies must pay significantly more to compete for a scarce pool of workers—or when supply chains stall due to lack of labor—those costs are passed on to consumers, driving up the cost of living.

•Reduced Innovation: Immigrants have historically high rates of entrepreneurship and patent filing. A drop in high-skilled immigration reduces start-up creation, slowing down overall productivity.

Conclusion

While restricting immigration may satisfy certain political or social goals, the economic consensus is clear: stopping immigration severely constrains the labor supply. Because of demographic shifts, domestic workers cannot simply fill the void. Instead of helping native workers, the resulting labor shortages generally lead to smaller business operations, higher inflation, delayed infrastructure and housing projects, and slower overall economic growth.

Citations (10)

1shrm.orgNonprofits and think tanks
shrm.org
Backs: “Based on a broad consensus among economists, empirical studies, and historical data, stopping or severely restricting immigration does cause significant and persistent labor shortages.”
2econofact.orgAcademic
econofact.org
Backs: “Based on a broad consensus among economists, empirical studies, and historical data, stopping or severely restricting immigration does cause significant and persistent labor shortages.”
3equitablegrowth.orgNonprofits and think tanks
equitablegrowth.org
Backs: “Based on a broad consensus among economists, empirical studies, and historical data, stopping or severely restricting immigration does cause significant and persistent labor shortages.”
4hbs.eduAcademic
hbs.edu
Backs: “While proponents of immigration restrictions often argue that limiting foreign labor will force employers to raise wages and hire native-born workers, real-world evidence shows that the primary results are unfilled jobs, delayed projects, business contractions, and higher prices for consumers.”
5forbes.comNews and mediaquality 0.83
forbes.com
Backs: “While proponents of immigration restrictions often argue that limiting foreign labor will force employers to raise wages and hire native-born workers, real-world evidence shows that the primary results are unfilled jobs, delayed projects, business contractions, and higher prices for consumers.”
6wes.orgNonprofits and think tanks
wes.org
Backs: “While proponents of immigration restrictions often argue that limiting foreign labor will force employers to raise wages and hire native-born workers, real-world evidence shows that the primary results are unfilled jobs, delayed projects, business contractions, and higher prices for consumers.”
7americanprogress.orgNonprofits and think tanks
americanprogress.org
Backs: “Most developed countries, including the United States, are facing an aging domestic workforce and declining birth rates.”
8cfr.orgNonprofits and think tanks
cfr.org
Backs: “Agriculture & Food Systems: Over 60% of farmworkers are foreign-born.”
9princeton.eduAcademic
princeton.edu
Backs: “A common economic misconception is that native-born and foreign-born workers are perfect substitutes (i.e., if an immigrant leaves, a native-born worker simply steps into their spot).”
10reddit.comForums and Q&A
reddit.com
Backs: “The classic counterargument is that restricting the labor supply will cause wages to rise.”