Will stopping immigration cause labor shortages?

Whether stopping immigration will cause labor shortages is one of the most heavily debated topics in economics.

The consensus among mainstream economists is yes, a sudden or severe halt to immigration causes immediate, acute labor shortages, slows economic growth, and drives inflation. However, proponents of immigration restriction argue that these "shortages" are actually "wage shortages" and that restricting foreign labor forces positive, long-term structural changes, such as wage increases and technological innovation.

1. The Argument That Stopping Immigration Will Cause Labor Shortages

Mainstream economic research and industry data suggest that restricting immigration creates deep labor deficits, particularly in developed nations.

•Demographic Realities (The Shrinking Workforce): Most developed nations (such as the U.S., much of Western Europe, and Japan) face rapidly aging populations and declining birth rates. Without immigration, the total pool of working-age people in these countries is projected to shrink. Deaths will begin to outpace births, leaving fewer workers to support retired populations.

•Sector-Specific Vulnerabilities: Certain industries rely disproportionately on foreign-born labor. If immigration stops, these sectors immediately struggle to find workers:

•Agriculture and Food Supply: Immigrants make up a massive share of crop harvesters and meat packers.

•Construction: Foreign-born workers represent a substantial portion of construction labor (up to 40% in states like Texas and California).

•Service and Hospitality: Hotels, restaurants, and tourism-related businesses rely heavily on seasonal and entry-level immigrant labor.

•Healthcare and Caregiving: With an aging population, the demand for nurses, elder care, and home-health aides is soaring—roles frequently filled by foreign-born workers.

•Labor "Complementarity" (Job Losses for Native Workers): Immigrants do not simply "take" jobs from native-born workers; they often complement them. For example, hiring foreign-born construction laborers allows a firm to take on more projects, which in turn preserves or creates jobs for native-born architects, project managers, and specialized contractors. Studies show that reducing the immigrant workforce often shrinks entire industries, inadvertently leading to job losses and wage stagnation for native-born workers in those same sectors.

•High-Skill Labor Gaps: Tech, engineering, and medical research rely heavily on high-skilled global talent. Restricting specialized visas (like the H-1B in the U.S.) can lead to critical talent shortages in high-growth, high-value industries.

2. The Argument That Stopping Immigration Will Not Cause Long-Term Shortages

Restrictionist economists and policymakers argue that "labor shortages" are not inevitable, but are instead a temporary phase of market adjustment that can ultimately benefit domestic workers.

•The "Wage Shortage" Perspective: Proponents of this view argue that employers claiming a "labor shortage" are actually experiencing a wage shortage—meaning they cannot find workers at the low wages they wish to pay. If the supply of cheap immigrant labor is cut off, supply-and-demand dynamics dictate that employers must raise wages and improve working conditions to attract domestic workers who were previously sidelined or working in other fields.

•Incentives for Automation and Productivity: When labor is cheap and plentiful, businesses have little financial incentive to invest in automation. Restricting immigration forces companies to innovate. For instance, rather than relying on manual labor to harvest crops or wash dishes, farms and restaurants are forced to invest in robotic harvesters, AI, and advanced machinery, boosting overall economic productivity.

•Bringing Back Discouraged Workers: Higher wages resulting from a tighter labor market can draw "discouraged workers" (such as those who dropped out of the workforce, older workers, or younger demographics) back into employment.

Real-World Case Studies

•The United Kingdom (Post-Brexit): When the UK ended the free movement of workers from the EU, it experienced immediate, severe labor shortages in heavy goods vehicle (HGV) driving, agriculture, hospitality, and healthcare. While wages did rise in some of these sectors to attract British workers, the transition was painful, resulting in unharvested crops, supply chain delays, and inflation.

•Japan: Historically, Japan maintained highly restrictive immigration policies despite having one of the oldest populations in the world. To cope with severe labor shortages, Japan invested heavily in robotics and automation. However, technology alone was not enough to fill the gap, especially in high-touch sectors like elder care, forcing Japan to gradually relax its laws and introduce new guest-worker visa programs.

•The United States: During the COVID-19 pandemic, net immigration to the U.S. essentially halted for nearly two years, resulting in an estimated 2 million "missing" immigrant workers. Economists widely cite this period as a primary driver of the severe, post-pandemic labor shortages and subsequent inflation. Subsequent periods of policy-driven immigration restrictions have similarly correlated with contractions in industries like construction and manufacturing.

Conclusion

Ultimately, stopping immigration does cause immediate and painful labor shortages, particularly in sectors reliant on manual labor, seasonal work, and caregiving.

Whether these shortages are "good" or "bad" depends on economic priorities:

•Mainstream economic theory warns that the price of stopping immigration is slower economic growth, higher consumer prices (inflation), and structural pain for businesses.

•Restrictionist theory argues that this pain is a necessary step toward building a high-wage, high-productivity economy that prioritizes domestic workers and technological innovation.

Citations (11)

1equitablegrowth.orgNonprofits and think tanks
equitablegrowth.org
Backs: “The consensus among mainstream economists is yes, a sudden or severe halt to immigration causes immediate, acute labor shortages, slows economic growth, and drives inflation.”
2cis.orgNonprofits and think tanks
cis.org
Backs: “However, proponents of immigration restriction argue that these "shortages" are actually "wage shortages" and that restricting foreign labor forces positive, long-term structural changes, such as wage increases and technological innovation.”
3cfr.orgNonprofits and think tanks
cfr.org
Backs: “However, proponents of immigration restriction argue that these "shortages" are actually "wage shortages" and that restricting foreign labor forces positive, long-term structural changes, such as wage increases and technological innovation.”
4bakerinstitute.orgNonprofits and think tanks
bakerinstitute.org
Backs: “Demographic Realities (The Shrinking Workforce): Most developed nations (such as the U.S., much of Western Europe, and Japan) face rapidly aging populations and declining birth rates.”
5americanprogress.orgNonprofits and think tanks
americanprogress.org
Backs: “Deaths will begin to outpace births, leaving fewer workers to support retired populations.”
6wes.orgNonprofits and think tanks
wes.org
Backs: “If immigration stops, these sectors immediately struggle to find workers: Agriculture and Food Supply: Immigrants make up a massive share of crop harvesters and meat packers.”
7americanimmigrationcouncil.orgNonprofits and think tanks
americanimmigrationcouncil.org
Backs: “Labor "Complementarity" (Job Losses for Native Workers): Immigrants do not simply "take" jobs from native-born workers; they often complement them. For example, hiring foreign-born construction laborers allows a firm to take on more projects, which in turn preserves or creates jobs for native-born architects, project…”
8epi.orgNonprofits and think tanks
epi.org
Backs: “For example, hiring foreign-born construction laborers allows a firm to take on more projects, which in turn preserves or creates jobs for native-born architects, project managers, and specialized contractors. Studies show that reducing the immigrant workforce often shrinks entire industries, inadvertently leading to…”
9econofact.orgAcademic
econofact.org
Backs: “High-Skill Labor Gaps: Tech, engineering, and medical research rely heavily on high-skilled global talent. Restricting specialized visas (like the H-1B in the U.S.) can lead to critical talent shortages in high-growth, high-value industries.”
10brookings.eduNonprofits and think tanks
brookings.edu
Backs: “Restricting specialized visas (like the H-1B in the U.S.) can lead to critical talent shortages in high-growth, high-value industries.”
11frbsf.orgGovernment
frbsf.org
Backs: “Subsequent periods of policy-driven immigration restrictions have similarly correlated with contractions in industries like construction and manufacturing. Conclusion”