Will stopping immigration cause labor shortages?

Whether stopping immigration will cause labor shortages is a central question in modern economics and public policy. The short answer is yes, in most developed economies, stopping immigration is highly likely to cause significant and persistent labor shortages.

However, the full economic picture is nuanced. While a broad consensus of economists points to severe workforce disruptions if immigration is halted, proponents of immigration restrictions argue that labor scarcity can drive positive structural changes, such as wage growth and automation.

1. Why Stopping Immigration Causes Labor Shortages

For most developed nations (including the United States, Canada, the United Kingdom, and much of Western Europe), immigration is a primary driver of workforce growth. If it stops, several structural factors trigger labor shortages:

•The Demographic Cliff: Many developed nations are facing aging populations and birth rates well below the replacement level of 2.1 children per woman. Without immigration, the natural size of the working-age population contracts. As millions of Baby Boomers retire, there are simply not enough young, native-born workers entering the workforce to replace them.

•High Dependence in Critical Sectors: Certain vital industries rely disproportionately on foreign-born labor. For example, in the United States, immigrants represent about 19% of the overall workforce, but they make up significantly higher percentages in specific fields:

•Agriculture: Up to 70% of farmworkers are foreign-born.

•Construction & Maintenance: Immigrants account for over 30% of construction and building maintenance workers.

•Hospitality & Food Services: Restaurants and hotels rely heavily on immigrant labor to function.

•Healthcare & Caregiving: Eldercare and home health aid agencies face severe staffing shortages without immigrant workers.

•STEM and High-Tech: Over 25% of computer and mathematical workers in the U.S. are foreign-born.

•The Interdependence of Jobs (Complementarity): Economists point out that immigrant and native-born workers rarely compete directly; instead, they often "complement" one another. For example, if a construction company cannot hire enough low-skilled immigrant laborers to lay foundations, the project is delayed or canceled. This ultimately puts native-born supervisors, plumbers, and electricians out of work.

2. The Alternative Perspective: Why Some Argue Restrictions Can Help

Proponents of restricting immigration, along with some labor economists, argue that stopping or slowing immigration does not have to result in permanent economic harm. They point to several potential adjustments:

•Rising Wages for Low-Income Workers: In a tight labor market with a limited supply of workers, employers must compete for labor. To attract native-born workers to physically demanding or low-paying jobs, businesses are forced to raise wages, improve working conditions, and offer better benefits.

•Incentives for Automation and Productivity: When labor is cheap and abundant, businesses have little incentive to invest in expensive technology. If labor becomes scarce and expensive, companies are forced to innovate. For example, a farm might invest in robotic harvesting machines, or a restaurant might install digital ordering kiosks. While this reduces the overall number of jobs, it increases the productivity of the remaining workforce.

•Mobilizing Sidelined Domestic Workers: Higher wages and targeted recruiting can draw marginalized groups back into the labor force. This includes retirees looking for part-time work, individuals with disabilities, those with past criminal records, or young people who have dropped out of the workforce.

•Easing Public Infrastructure Strain: Fewer immigrants can reduce the immediate demand for housing, public transit, school systems, and healthcare services, potentially lowering the cost of living (specifically rent) for native-born residents.

3. What the Empirical Evidence Shows

When immigration declines sharply, economic data typically shows that the negative consequences of labor shortages outweigh the benefits:

•Inflation and Reduced Output: When businesses cannot find workers, they must either raise prices to cover higher wage costs or scale back operations. In agriculture, for instance, a lack of workers often leads to crops rotting in fields, which drives up grocery prices and forces countries to rely more heavily on food imports.

•The "Lump of Labor" Fallacy: Critics of immigration often assume there is a fixed number of jobs in an economy, and that more immigrants mean fewer jobs for native-born citizens. However, economists note that immigrants are not just workers; they are also consumers. They buy groceries, rent apartments, and pay taxes. When immigration stops, consumer demand falls, shrinking the overall economy and actually reducing the total number of jobs available.

•Impact on Native-Born Unemployment: Recent periods of reduced immigration have not historically resulted in lower unemployment for native-born workers. Because many businesses cannot function or expand without a complete workforce, a drop in immigrant labor often leads to a slowdown in overall business investment and fewer job opportunities across the board.

Conclusion

While stopping immigration can theoretically pressure companies to raise wages for low-skilled work and invest in automation, the empirical reality is that it leads to immediate, widespread labor shortages. Because developed countries are aging rapidly, immigrant labor is a structural necessity for maintaining food supply chains, constructing housing, caring for the elderly, and driving tech innovation. Without it, economic growth slows, inflation tends to rise, and many businesses are forced to contract or close.

Citations (13)

1forumtogether.orgNonprofits and think tanks
forumtogether.org
Backs: “The Demographic Cliff: Many developed nations are facing aging populations and birth rates well below the replacement level of 2.1 children per woman.”
2shrm.orgNonprofits and think tanks
shrm.org
Backs: “For example, in the United States, immigrants represent about 19% of the overall workforce, but they make up significantly higher percentages in specific fields:”
3lse.ac.ukAcademic
lse.ac.uk
Backs: “Hospitality & Food Services: Restaurants and hotels rely heavily on immigrant labor to function.”
4americanimmigrationcouncil.orgNonprofits and think tanks
americanimmigrationcouncil.org
Backs: “The Interdependence of Jobs (Complementarity): Economists point out that immigrant and native-born workers rarely compete directly; instead, they often "complement" one another.”
5equitablegrowth.orgNonprofits and think tanks
equitablegrowth.org
Backs: “The Interdependence of Jobs (Complementarity): Economists point out that immigrant and native-born workers rarely compete directly; instead, they often "complement" one another.”
6nih.govGovernment
nih.gov
Backs: “Rising Wages for Low-Income Workers: In a tight labor market with a limited supply of workers, employers must compete for labor.”
7historyandpolicy.orgNot yet classified
historyandpolicy.org
Backs: “Rising Wages for Low-Income Workers: In a tight labor market with a limited supply of workers, employers must compete for labor.”
8cato.orgNonprofits and think tanks
cato.org
Backs: “If labor becomes scarce and expensive, companies are forced to innovate.”
9wes.orgNonprofits and think tanks
wes.org
Backs: “Easing Public Infrastructure Strain: Fewer immigrants can reduce the immediate demand for housing, public transit, school systems, and healthcare services, potentially lowering the cost of living (specifically rent) for native-born residents.”
10mixedmigration.orgNonprofits and think tanks
mixedmigration.org
Backs: “Easing Public Infrastructure Strain: Fewer immigrants can reduce the immediate demand for housing, public transit, school systems, and healthcare services, potentially lowering the cost of living (specifically rent) for native-born residents.”
11forbes.comNews and mediaquality 0.83
forbes.com
Backs: “The "Lump of Labor" Fallacy: Critics of immigration often assume there is a fixed number of jobs in an economy, and that more immigrants mean fewer jobs for native-born citizens.”
12cato.orgNonprofits and think tanks
cato.org
Backs: “The "Lump of Labor" Fallacy: Critics of immigration often assume there is a fixed number of jobs in an economy, and that more immigrants mean fewer jobs for native-born citizens.”
13brookings.eduNonprofits and think tanks
brookings.edu
Backs: “However, economists note that immigrants are not just workers; they are also consumers.”