Will stopping immigration cause labor shortages?

Whether stopping immigration will cause labor shortages is a central question in modern economics. The broad consensus among economists is that stopping immigration would cause severe and immediate labor shortages, particularly in developed nations. However, proponents of immigration restrictions argue that over the long term, a lack of foreign labor forces the market to adjust through wage increases, domestic hiring, and automation.

An analysis of both perspectives, the economic evidence, and the transition dynamics illustrates how stopping immigration affects the labor market.

1. Why Stopping Immigration Causes Labor Shortages

Most economists argue that a sudden or complete halt to immigration would trigger widespread labor shortages for several key reasons:

•Demographics and Shrinking Populations: Most advanced economies (including the United States, Japan, and much of Western Europe) have birth rates well below the replacement level and rapidly aging populations. As "Baby Boomers" retire, there are not enough native-born workers entering the workforce to replace them. Without immigration, the total size of the workforce in these countries naturally shrinks.

•High Reliance in Specific Sectors: Certain critical industries depend overwhelmingly on foreign-born labor. For example:

•Agriculture: In the U.S., foreign-born workers make up roughly 70% of the agricultural workforce. A sudden halt to immigration historically leads to crops rotting in fields due to a lack of harvest hands.

•Hospitality and Food Service: These sectors rely heavily on seasonal and entry-level immigrant labor to maintain service levels.

•Construction and Caregiving: Home building, eldercare, and healthcare assistance face chronic staffing shortages that are heavily buffered by immigrant labor.

•"Complementary" Labor Markets: Immigrants and native-born workers often do not directly compete for the same jobs; rather, they complement each other. For instance, having sufficient agricultural or construction laborers (often immigrants) creates and sustains higher-paying management, logistics, and engineering jobs (often held by native-born workers). Removing the baseline labor can cause a contraction that eliminates these complementary jobs.

•Real-World Evidence (The Post-Pandemic and Brexit Experiments):

•Following Brexit, the United Kingdom restricted the free movement of European Union workers. This resulted in immediate, acute shortages in truck driving, agriculture, and hospitality, which led to supply chain disruptions.

•In the United States, the post-COVID-19 economic recovery saw a massive spike in job openings. Economic studies showed that the subsequent rebound of immigration between 2021 and 2024 played a direct role in filling those vacancies and cooling down acute labor shortages, particularly in leisure and hospitality.

2. The Argument That Markets Will Self-Correct (The Restrictionist Perspective)

Those who favor restricting immigration argue that "labor shortages" are often a temporary symptom of a market adjusting to a new equilibrium. They argue that restricting foreign labor yields positive long-term economic shifts:

•Wage Growth for Native Workers: Standard economic theory suggests that when the supply of labor goes down, its price (wages) must go up. Restrictionists argue that cheap immigrant labor keeps wages artificially low, particularly for low-skilled native workers. Stopping immigration forces employers to raise wages and improve working conditions to attract domestic workers who are currently unemployed or out of the labor force.

•Incentives for Automation and Productivity: When labor is cheap and plentiful, businesses have little incentive to invest in expensive technology. A shortage of labor forces companies to innovate. For example, a farm facing a labor shortage is more likely to invest in automated harvesting machinery. Historically, restrictionist policies have been shown to accelerate automation in manufacturing and agriculture, ultimately boosting productivity per worker.

•Mobilizing Underutilized Domestic Labor: Proponents of lower immigration argue that shortages encourage governments and businesses to focus on retraining and recruiting domestic populations that have historically faced barriers to employment, such as youth, veterans, older workers, or those living in economically depressed regions.

3. The Trade-offs and the "Transition Problem"

While both sides point to valid economic mechanisms, the primary disagreement lies in the speed and pain of the transition.

If immigration stops, the market does not adjust overnight. Raising wages to attract native workers can drive up the costs of goods and services, contributing to inflation. Furthermore, some jobs cannot easily be automated or filled by native workers due to geographic mismatches (e.g., remote farm work) or physical demands, leading to business closures or a permanent reduction in economic output (GDP).

Japan serves as a famous case study: for decades, it strictly limited immigration, relying heavily on automation to cope with its aging population. While this successfully spurred high-tech robotics, the country still faced persistent, severe labor shortages in eldercare and service industries, eventually forcing the Japanese government to ease visa restrictions to let in foreign workers.

Conclusion

Stopping immigration will almost certainly cause immediate, disruptive labor shortages in industries that rely heavily on foreign labor, leading to higher prices and reduced output in those sectors. Over a longer horizon, the economy would partially adapt by raising wages to attract domestic workers and investing in automation. However, in countries with rapidly aging populations, these market corrections are rarely enough to entirely offset the loss of workers, often resulting in a smaller overall economy.

Citations (9)

1equitablegrowth.orgNonprofits and think tanks
equitablegrowth.org
Backs: “The broad consensus among economists is that stopping immigration would cause severe and immediate labor shortages, particularly in developed nations.”
2wes.orgNonprofits and think tanks
wes.org
Backs: “The broad consensus among economists is that stopping immigration would cause severe and immediate labor shortages, particularly in developed nations.”
3dcjournal.comNews and media
dcjournal.com
Backs: “However, proponents of immigration restrictions argue that over the long term, a lack of foreign labor forces the market to adjust through wage increases, domestic hiring, and automation.”
4lse.ac.ukAcademic
lse.ac.uk
Backs: “However, proponents of immigration restrictions argue that over the long term, a lack of foreign labor forces the market to adjust through wage increases, domestic hiring, and automation.”
5forumtogether.orgNonprofits and think tanks
forumtogether.org
Backs: “High Reliance in Specific Sectors: Certain critical industries depend overwhelmingly on foreign-born labor.”
6aclu.orgNonprofits and think tanks
aclu.org
Backs: “Construction and Caregiving: Home building, eldercare, and healthcare assistance face chronic staffing shortages that are heavily buffered by immigrant labor.”
7econlib.orgEncyclopedias and reference
econlib.org
Backs: “"Complementary" Labor Markets: Immigrants and native-born workers often do not directly compete for the same jobs; rather, they complement each other.”
8aeaweb.orgAcademic
aeaweb.org
Backs: “For instance, having sufficient agricultural or construction laborers (often immigrants) creates and sustains higher-paying management, logistics, and engineering jobs (often held by native-born workers).”
9migrationpolicy.orgNonprofits and think tanks
migrationpolicy.org
Backs: “Stopping immigration forces employers to raise wages and improve working conditions to attract domestic workers who are currently unemployed or out of the labor force.”