Will stopping immigration cause labor shortages?

Will Stopping Immigration Cause Labor Shortages?

Based on extensive economic research and recent real-world evidence, the overwhelming consensus among economists is yes—sharply reducing immigration tends to worsen labor shortages, particularly in specific sectors, though there's debate about long-term effects and the degree to which native workers can fill the gap.

The Current Real-World Test Case

The U.S. is currently running a live experiment on this question. Under the second Trump administration's immigration crackdown, between January and June 2025, the foreign-born population fell by nearly 2 million people, marking the first major decline since the 1960s. The effects are already visible:

Construction: The construction industry, which already suffers from labor shortages, is at risk of wage inflation, with average wage growth in July approaching 8%, nearly double the national average. Construction companies have shed 10,000 jobs since May, and restaurants, construction and landscaping businesses have lost a combined 315,000 immigrant workers through August 2025, more than any other industries.

Agriculture: In agriculture, foreign-born workers comprise approximately 70% of the farm workforce nationwide, and many farms report difficulty finding enough workers during critical harvest periods. The Labor Department itself acknowledged this, stating: "The near total cessation of the inflow of illegal aliens combined with the lack of an available legal workforce results in significant disruptions to production costs and threatens the stability of domestic food production and prices for U.S consumers".

Hospitality and healthcare: Job growth in immigrant-heavy industries like hotels, restaurants, construction and home health aides has been flat since the start of 2025, growing at a 0% rate in July, compared to continued growth elsewhere in the economy.

Why This Happens: The Economic Logic

Immigrants fill specific labor niches. Immigrant workers account for 43% of farm workers, 30% of food production and processing workers, 28% of construction workers, and a substantial portion of these jobs are filled by undocumented workers—for example, 42% of crop workers—because of limits on guest worker visas and lack of interest by U.S.-born workers.

Native workers don't fully substitute. Historical evidence from COVID-era disruptions supports this: after the COVID-19 shock, immigration disruption led to a shortfall of 1.65 million in the working-age immigrant population, a gap that was not filled by increasing employment of native-born workers.

Demographics make this structural, not just cyclical. Immigration is the driving force behind America's labor supply growth, accounting for about half of labor force growth each year for the past three decades, and the U.S. population is aging, with deaths expected to exceed births by 2030.

The Macroeconomic Impact

Multiple independent analyses project measurable drag on GDP and employment growth:

The Counterargument

Not everyone agrees the shortage is permanent or severe. Administration officials argue otherwise: Some top administration officials, including Vice President JD Vance, have argued that limiting immigration will raise wages and create more job opportunities for U.S.-born workers, contending that these workers are available to counter labor shortages. Some economists are also skeptical of a prolonged reduction—the Trump administration's plan likely isn't to have "net-out migration," as one economist noted, "We didn't see net-out migration in [Trump's] first term".

However, actual labor market data so far hasn't supported the "replacement" theory: the labor force participation rate for native-born workers fell in the fall of 2025 and remains lower than forecasted, with native-born employment indicators continuing to stagnate or perform worse than forecasted trends.

Bottom Line

Research strongly suggests that abruptly cutting immigration does create or worsen labor shortages—especially in agriculture, construction, hospitality, food processing, and caregiving, where immigrants are disproportionately represented and native-born workers have historically shown little interest or ability to quickly fill the gap. The effects show up as unfilled jobs, wage inflation in affected sectors, slower economic growth, and higher consumer prices, rather than simply opening opportunities for native workers at the same wages. Whether this is a short-term adjustment pain or a lasting structural problem remains debated, but the weight of current evidence points toward real economic costs rather than a clean one-for-one substitution of native for immigrant labor.