Will stopping immigration cause labor shortages?

The short answer is yes, stopping or severely restricting immigration is highly likely to cause immediate and persistent labor shortages, particularly in developed economies. However, how these shortages affect the broader economy over the long term depends on how businesses, wages, and technology adjust.

Mainstream economists, industry leaders, and policy analysts generally agree on the mechanisms behind these shortages, while restrictionist perspectives point to alternative market adjustments.

1. Why Stopping Immigration Causes Labor Shortages

Developed nations like the United States, Canada, the United Kingdom, and much of Western Europe face structural demographic shifts that make them highly reliant on foreign-born labor.

•Demographic Decline and Aging Workforces: Most industrialized countries have birth rates well below the replacement level. As the "Baby Boomer" generation retires, there are not enough native-born workers entering the workforce to replace them. Immigrants lower the median age of the workforce and fill this demographic gap.

•Sector-Specific Vulnerabilities: Certain industries are highly dependent on immigrant labor because native-born workers are either unavailable in sufficient numbers or unwilling to take these roles.

•Low- and Medium-Skilled Sectors: Agriculture, construction, hospitality/food services, and eldercare/home health aides rely heavily on foreign-born workers.

•High-Skilled Sectors: Technology, engineering, healthcare, and academic research rely on high-skilled immigration (such as H-1B visas in the U.S.) to drive innovation and address specialist shortages.

•Real-World Examples:

•The United States: During the COVID-19 pandemic (2020–2022), immigration to the U.S. essentially flatlined, resulting in roughly 2 million "missing" immigrant workers. Federal Reserve officials and economists noted that this sudden drop directly contributed to severe labor shortages and fueled inflation, as businesses had to struggle to fill open positions. More recently, policy shifts and stricter border enforcement in 2024–2026 led to flatlined job growth in construction, hotels, and caregiving.

•The United Kingdom (Post-Brexit): When the UK ended the "free movement" of European Union workers after Brexit, it experienced severe labor shortages in agriculture, hospitality, and road freight. While the government attempted to pivot toward recruiting high-skilled non-EU workers, lower-skilled sectors suffered persistent vacancies.

2. How the Economy Tries to Adjust (The Counterargument)

Proponents of restricting immigration argue that a "labor shortage" is not a permanent state, but rather a temporary market imbalance. They suggest that stopping immigration forces the economy to adjust in ways that can benefit domestic workers:

•Rising Wages: In a standard supply-and-demand model, if the supply of labor goes down, the price of labor (wages) must go up. Employers are forced to compete for a limited pool of native-born workers by offering higher pay, better benefits, and improved working conditions.

•Increased Productivity and Automation: If labor becomes scarce and expensive, businesses are incentivized to invest in labor-saving technologies (such as automated harvesting machines in farming, self-service kiosks in fast food, or advanced software in offices). This can raise overall economic productivity.

•Drawing from the Margins: Higher wages may entice historically underemployed domestic groups—such as retired workers, stay-at-home parents, or individuals who had dropped out of the workforce—back into employment.

3. The Trade-offs and Unintended Consequences

While the theoretical adjustment of "higher wages and more automation" sounds ideal, real-world economic data shows that restricting immigration comes with steep trade-offs:

•Inflation and Higher Consumer Prices: When businesses are forced to raise wages to attract a scarce pool of local workers, they typically pass those higher labor costs onto consumers. For example, a shortage of agricultural and logistical workers directly translates into more expensive groceries and restaurant meals.

•Stagnant Economic Growth: In many cases, businesses cannot easily automate their processes or afford to raise wages indefinitely. Instead of adjusting, some businesses simply shrink, reduce their operating hours, or close down. This leads to an overall contraction of economic output (GDP).

•The "Lump of Labor" Fallacy: A common misconception is that there is a fixed number of jobs in an economy, and that restricting immigrants leaves more jobs for citizens. However, immigrants are not just workers; they are also consumers. They buy food, rent apartments, and pay for services, which in turn creates demand for more jobs. Restricting immigration shrinks the total size of the consumer market, which can paradoxically reduce job creation for native-born workers.

Conclusion

Stopping immigration will cause immediate labor shortages, particularly in agriculture, construction, healthcare, and hospitality. Over time, the market will attempt to correct this through wage increases and automation. However, in rapidly aging societies, these adjustments are rarely enough to fully offset the loss of workers. The typical result of a complete halt to immigration is a combination of higher inflation, reduced services, and slower overall economic growth.

Citations (12)

1bakerinstitute.orgNonprofits and think tanks
bakerinstitute.org
Backs: “Developed nations like the United States, Canada, the United Kingdom, and much of Western Europe face structural demographic shifts that make them highly reliant on foreign-born labor.”
2premierscience.comNot yet classified
premierscience.com
Backs: “Developed nations like the United States, Canada, the United Kingdom, and much of Western Europe face structural demographic shifts that make them highly reliant on foreign-born labor.”
3reddit.comForums and Q&A
reddit.com
Backs: “Demographic Decline and Aging Workforces: Most industrialized countries have birth rates well below the replacement level.”
4econofact.orgAcademic
econofact.org
Backs: “Sector-Specific Vulnerabilities: Certain industries are highly dependent on immigrant labor because native-born workers are either unavailable in sufficient numbers or unwilling to take these roles.”
5cis.orgNonprofits and think tanks
cis.org
Backs: “Sector-Specific Vulnerabilities: Certain industries are highly dependent on immigrant labor because native-born workers are either unavailable in sufficient numbers or unwilling to take these roles.”
6fwd.usNonprofits and think tanks
fwd.us
Backs: “Low- and Medium-Skilled Sectors: Agriculture, construction, hospitality/food services, and eldercare/home health aides rely heavily on foreign-born workers.”
7piie.comNonprofits and think tanks
piie.com
Backs: “Low- and Medium-Skilled Sectors: Agriculture, construction, hospitality/food services, and eldercare/home health aides rely heavily on foreign-born workers.”
8equitablegrowth.orgNonprofits and think tanks
equitablegrowth.org
Backs: “Federal Reserve officials and economists noted that this sudden drop directly contributed to severe labor shortages and fueled inflation, as businesses had to struggle to fill open positions. More recently, policy shifts and stricter border enforcement in 2024–2026 led to flatlined job growth in construction, hotels,…”
9researchgate.netAcademic
researchgate.net
Backs: “The United Kingdom (Post-Brexit): When the UK ended the "free movement" of European Union workers after Brexit, it experienced severe labor shortages in agriculture, hospitality, and road freight. While the government attempted to pivot toward recruiting high-skilled non-EU workers, lower-skilled sectors suffered…”
10migrationpolicy.orgNonprofits and think tanks
migrationpolicy.org
Backs: “Employers are forced to compete for a limited pool of native-born workers by offering higher pay, better benefits, and improved working conditions. Increased Productivity and Automation: If labor becomes scarce and expensive, businesses are incentivized to invest in labor-saving technologies (such as automated…”
11europa.euGovernment
europa.eu
Backs: “Employers are forced to compete for a limited pool of native-born workers by offering higher pay, better benefits, and improved working conditions. Increased Productivity and Automation: If labor becomes scarce and expensive, businesses are incentivized to invest in labor-saving technologies (such as automated…”
12migrationpolicy.orgNonprofits and think tanks
migrationpolicy.org
Backs: “However, immigrants are not just workers; they are also consumers. They buy food, rent apartments, and pay for services, which in turn creates demand for more jobs.”