Will stopping immigration cause labor shortages?

Yes, in most economic analyses and in current real-world experience, sharply reducing immigration does tend to cause labor shortages — though there's some nuance in how this plays out across sectors and time horizons.

The Basic Economic Logic

Immigration has accounted for almost half of U.S. labor force growth since 1995, and slower labor force growth would negatively impact employment and GDP growth. This is because since 1995, the population of foreign-born workers has grown 2.8 percent per year while the native born grew only 0.6 percent per year. With native-born population growth stagnating due to falling birth rates, immigrants have become the primary source of labor force growth — and in recent years, virtually all of it, because the native-born working-age population is barely growing.

A key point economists make is that cutting immigration doesn't simply shift existing jobs to native workers — reducing immigration does not reallocate jobs to U.S.-born workers — it reduces the overall size of the economy that creates those jobs. Fewer workers also means fewer consumers, fewer businesses and less demand across the system.

What's Happening in 2025-2026

Current U.S. immigration enforcement provides a real-time test case. 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 these workers are available to counter labor shortages — "There is no shortage of American minds and hands to grow our labor force," per a White House spokesperson.

However, the evidence on the ground tells a different story:

Construction: The construction industry, where more than a quarter of workers are foreign-born, has long struggled to find enough workers, and industry officials say Trump's immigration crackdown is making it worse. In California specifically, reports indicate about 41% of California construction workers are foreign-born, making this sector very sensitive to immigration enforcement, with contractors saying some workers now demand double the usual pay, which drives up costs for everyone.

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, a challenge that has intensified in the first half of 2025 due to increased interior immigration enforcement. Notably, even the federal government has acknowledged this: the Labor Department admitted earlier this month in a filing in the Federal Register that Trump's immigration crackdown risked a "labor shortage exacerbated by the near total cessation of the inflow of illegal aliens."

Broader economic impact: A recent NBER study found significant labor market spillover effects — for every ICE arrest, six likely undocumented male workers stop working, and employment declined among U.S.-born men with less education in areas with high numbers of ICE arrests, as businesses scale back and reduce demand for all workers.

Manufacturing: The effects extend beyond typically "immigrant-heavy" sectors. At one plant, over 125 employees lost their jobs due to canceled work permits at a GE Appliances plant, causing slowdowns and concerns about safety, while a Kraft Heinz facility has reportedly required extended overtime as remaining staff struggle to meet demand.

Long-term Projections

Looking further ahead, one study modeled a scenario where under a zero-immigration scenario where immigration stopped for the next two decades, the U.S. working-age population would shrink 11% by 2040. Separately, a 2025 study found current immigration policies will lower the projected average annual economic growth rate to 1.3% from 1.8% between fiscal year 2025 to fiscal year 2035.

The Counterargument / Nuance

It's worth noting there is a more nuanced view among some economists: reducing illegal or unauthorized immigration specifically could be beneficial if paired with legal reform. One labor economist noted: "If you can stop undocumented immigration, then great. This is a great time to work on comprehensive immigration reform." The concern isn't necessarily immigration enforcement itself, but enforcement that isn't paired with expanded legal pathways — leaving employers with no way to fill the gap. Indeed, business leaders and Hispanic advocacy groups are urging policy changes to allow long-term, tax-paying immigrant workers to obtain legal work permits, citing concerns over labor shortages, as employers report difficulty filling critical roles across industries such as construction, hospitality, agriculture and health care.

Bottom Line

The weight of current evidence — from government data, industry reports, and academic studies — strongly suggests that abruptly stopping or sharply curtailing immigration does cause labor shortages, particularly in agriculture, construction, hospitality, and healthcare, sectors where immigrants (including undocumented workers) fill a disproportionate share of jobs that are hard to staff with native-born workers alone. The theoretical argument that immigration restriction would simply "free up" jobs for native workers doesn't seem to be borne out by the 2025-2026 experience, where labor shortages, rising costs, and even job losses among native-born workers (due to reduced business activity) have been observed instead.