Will stopping immigration cause labor shortages?

Will halting immigration squeeze the labor market? I'll pull recent data on how immigration affects workforce shortages.

Yes, according to most labor economists and Federal Reserve research - stopping immigration entirely or sharply reducing it would worsen and prolong labor shortages in the U.S., though effects would be uneven across industries and regions.

1. Why economists expect shortages

U.S. labor markets are currently experiencing unprecedented labor shortages and reduced immigration flows in recent years have contributed to these labor supply shortages.

The underlying demographic reason is that slowing labor force growth is the product of the aging of the U.S. population, retiring baby boomers and declining birth rates — but immigrants and their children contributed more than one-half of workforce growth in the past two decades.

Without offsetting productivity gains, less immigration will directly translate into slower gross domestic product growth because a decline in the labor force means that one of the key inputs into production—labor—is now holding back the growth and supply capacity of the economy.

Recent analysis highlights:
> a sharp reduction in net migration would dampen real GDP growth because it would mean a smaller labor force and thus a smaller number of people producing goods and services

In 2025, net immigration has declined significantly and is on track to be near zero for 2025, with big implications: With fewer people in the workforce, the job market and economy could shrink.

A Dallas Fed projection illustrates long-run effects:
> if immigration to the U.S. continued at 2016 levels, the labor force would grow at a 0.45 percent annual rate from 2016 to 2060... A 50 percent decline in legal immigration would cut the growth rate by more than half, from 0.45 to 0.19 percent, and by 2060, there would be about 20 million fewer workers than in the base case.

Economists surveyed by the Wall Street Journal expect recent immigration restriction policies to subtract around 0.2 percentage point from growth in 2025 and 0.3 point in 2026, since economic output depends on the number of workers and their productivity, lower immigration mechanically lowers the growth rate.

Government data in May 2025 showed the size of the workforce shrunk in part because of the biggest back-to-back decline in the number of foreign-born workers in the labor force since 2020.

The shrinking pool of available labor represents a potential "speed limit" for the economy - if labor demand picks up, shortages could be revealed.

2. Which sectors are most exposed

Industries, occupations, and regions that rely more heavily on foreign workers have been particularly affected.

Research found industries that had a larger share of foreign-born workers in 2015 tended to experience more significant increases in job vacancy rates from 2016 to 2021.

For example, industries such as construction, leisure and hospitality, and other services had an above-average share of foreign workers in 2015 and experienced an above-average increase in job vacancy rates.

Broader lists of heavily dependent sectors include agriculture, food services, health care, transportation, and construction.

Unauthorized immigrants, who were 5% of the overall workforce in 2012, represent a notably higher share where they are concentrated: 16% of employees in the agriculture industry, 12% in construction and 9% in leisure and hospitality.

Other critical sectors identified as struggling to hire include agriculture, construction, hospitality, healthcare, and manufacturing, and research notes efforts to limit immigration may have negative ramifications particularly in key occupations such as health care that are already experiencing worker shortages.

Immigration also has a multiplier effect: in 2019, more than 25 percent of direct-care workers (such as nursing assistants, home health aides, and childcare workers) were foreign born. When those workers are missing, costs for care rise and some native workers, especially women, exit the labor force to provide care themselves, further reducing labor supply.

And:
> Even as pandemic-related immigration restrictions and delays wane and immigration levels increase, the demand for immigrant workers will likely continue to exceed the supply... As a result, industries and regions that depend on immigrant workers may continue to experience labor shortages

3. Would wages or automation offset shortages?

The main counter-argument is that stopping immigration would raise wages and draw more native-born workers into jobs, or spur automation, without creating a true shortage.

Evidence shows reduced supply does cause employers to raise wages to attract workers, consistent with previous studies showing as immigration declines, wages rise. Among economists who study immigration, the general consensus is that immigrants have virtually no negative effects on employment opportunities available to people born here.

Some occupations could be automated, as with tomato harvesters after the end of the bracero guest worker program, but that would not necessarily raise wages of low-skilled native workers who are substitutable with low-skilled immigrants, and sectors like direct care are less able to implement labor-saving technologies to substitute for missing immigrant workers and will likely experience increasing shortages and costs.

Bottom line

Mitigating factors — higher wages, increased native participation, automation, and offshoring — may fill some gaps over time, but given declining birth rates and retirement of baby boomers, immigration is described as a much more reliable driver of population and workforce growth than pro-natalist policies alone.