Will stopping immigration cause labor shortages?

Short answer: Yes, in many sectors — this is already happening

Real-world evidence from 2025–2026, as U.S. immigration enforcement has intensified, shows a fairly clear pattern: restricting immigration tightens labor supply in immigrant-dependent industries, even though the broader macroeconomic picture is more nuanced.

Where shortages are showing up

Construction: Immigrants made up roughly 30% of the U.S. construction workforce (closer to 40% in Texas and California). Industry surveys found that construction workforce shortages are the leading cause of project delays as new immigration enforcement efforts have impacted nearly one-third of construction firms, with 92 percent of contractors reporting they are having a hard time filling open positions. Even contractors are responding by raising wages — seven out of eight firms raised base pay for workers as much or more than they did a year earlier.

Agriculture: foreign-born workers comprise approximately 70% of the farm workforce nationwide, and many farms report difficulty finding enough workers during critical harvest periods, a challenge that has intensified in 2025 due to increased interior immigration enforcement. The Labor Department itself has flagged this risk: the Labor Department warned in October 2025 that the Trump administration's immigration policies risk creating a labor shortage in the sector.

Hospitality, food service, healthcare: since the start of 2025, job growth in industries heavily reliant on undocumented labor has been weaker than the rest of the private sector, including hotel, restaurant, construction, and health-care industries. In practical terms, the hospitality industry's labor force rose just 0.2% in June 2025, compared to 1.5% in June 2024.

Specific case examples: in Ottumwa, Iowa, 200 meatpacking workers who had legal status under the Biden administration had to be terminated after their status was stripped, while in Omaha, a DHS raid where half the employees were arrested caused recruitment to plummet and the plant to cut production.

Why this happens — the economics

Immigrants aren't just filling existing jobs; they're a major source of labor force growth. Immigration has accounted for almost half of U.S. labor force growth since 1995, so slower labor force growth would negatively impact employment and GDP growth. This matters more now because of demographics: without immigration, the U.S. population would shrink starting in 2033, partly because fertility rates are projected to remain low, according to the CBO.

Economists across the political spectrum largely agree on this mechanism. Moody's chief economist Mark Zandi called the shrinking immigrant labor force "definitive," saying "there's no debate what's going on there". Similarly, foreign workers make a particular contribution in low-wage, manual labor sectors where U.S. citizens typically prefer not to work, thus helping to relieve shortages and contain inflation — a benefit now at risk of being reversed.

The consequences: higher prices, not just vacancies

Shortages don't just mean unfilled jobs — they show up as inflation. Food costs in restaurants rose 3% and hotel/motel prices rose 2.6% between December 2024 and September 2025, with staffing shortages cited as a significant contributor. One analysis found that in states with high concentrations of undocumented construction workers, construction employment dropped 0.1% at a time when other states saw a 1.9% increase.

Important nuances and counterarguments

It's not the whole story. Not everyone attributes all current softness to immigration policy. The Minneapolis Fed found that the evidence points toward a slowdown in employment growth that goes beyond the direct effects of a slowdown in net migration — other demand-side factors are also at play.

Wage effects are debated. On whether natives benefit, economists disagree: Harvard's George Borjas has raised concerns about immigration's negative impact on the low-skilled labor pool, while economist Giovanni Peri has found that immigration has only a minimal effect on the wages of U.S.-born workers.

Timing/replacement issues matter. Interestingly, a Canadian study offers a counterpoint — suggesting high immigration levels can themselves fail to resolve shortages or even interact in complex ways: the C.D. Howe Institute's research has shown that the benefits of immigration in mitigating population aging and supporting GDP per capita growth have been more limited than expected. This suggests immigration isn't a cure-all and the relationship between migration flows and shortages depends heavily on sector, skill-matching, and how quickly labor markets adjust.

Possible offsetting policy responses. Some economists argue restricting illegal immigration while expanding legal pathways could address shortages without the current disruption — a labor economist at the Dallas Fed has noted that "lack of permanent status is costly to migrants, employers, and the broader economy," with workers made vulnerable to policy swings. The same economist noted the crackdown on illegal immigration could be a good thing if it leads to permanent solutions, saying "if you can stop undocumented immigration, then great... this is a great time to work on comprehensive immigration reform".

Bottom line

In sectors heavily dependent on immigrant labor — agriculture, construction, hospitality, food processing, and eldercare — sharply restricting immigration does appear to produce real, measurable shortages, higher costs, and project delays, based on 2025–2026 data. The effect is strongest where native-born workers are unwilling or unable to quickly fill the gap, and demographic trends (aging population, low birth rates) make this more acute for the U.S. long-term. However, the degree to which this is truly a net "shortage" problem for the whole economy (versus a localized, sector-specific one) remains debated, and the net wage/employment effects for native workers are not as clear-cut as the shortage headlines might suggest.