Will stopping immigration cause labor shortages?

Will Stopping Immigration Cause Labor Shortages?

The evidence strongly suggests yes, in many contexts it can—though the effects depend heavily on the country's demographics, which sectors are affected, and whether other policy levers are used to compensate. Here's what the research shows:

Real-World Evidence from the U.S.

Recent U.S. experience offers a live case study. Across the country, community leaders, employers, and policymakers are confronting a worsening workforce shortage as immigration has slowed. Recent economic data show that U.S.-born workers are negatively impacted by reduced immigration—the unemployment rate for U.S.-born workers increased from 4.3 percent in January 2025 to 4.7 percent in January 2026, which is notable because it contradicts the argument that fewer immigrants simply open up jobs for native workers.

Specific sectors show acute strain:

The economic ripple effects extend beyond direct labor shortfalls. One analysis found a shortage of skilled labor already costs the U.S. economy about $10.8 billion per year due to longer construction times and raises the price of new single-family homes by about $2,600, on average. More broadly, reduced immigration could cut annual economic growth by almost one-third by 2035, according to an October 2025 study by the National Foundation for American Policy.

The Counterargument

Not everyone agrees the shortage is severe or permanent. Some top administration officials, including Vice President JD Vance, have argued that limiting immigration will raise wages and create 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. Similarly, some economists are skeptical that the U.S. will suffer a prolonged reduction in the immigrant labor force, since the administration's plan likely isn't to have "net-out migration".

There's academic support for the wage-effect argument too: research from the Atlanta Fed found that a slowdown in low-skilled immigration relates the decline in low-skilled immigrant labor to subsequent wage increases for low-skilled workers, declining educational advancement by young US workers, and labor shortages in low-skilled jobs that can't be moved to other countries. In other words, restricting immigration can raise wages for existing low-skill workers—but it simultaneously creates shortages in jobs that can't be automated or outsourced, and can fuel inflation.

Why Demographics Make This Worse Over Time

The deeper structural issue is aging populations. The growing importance of immigrants in the labor force is a result of immigration trends, but it is also a reflection of the increasing retirement of the baby boom generation and low U.S. birth rates. This isn't unique to the U.S.—it's a global pattern:

Immigration Isn't a Complete Fix, Either

Importantly, research also cautions against treating immigration as a silver bullet. Migration can partly offset population ageing, but the scale required to fully offset expected demographic drags substantially exceeds historical experience, so policy responses to demographic decline need other measures like extending working lives and boosting productivity. And even where immigrants are present, poor integration can waste their potential—in the Netherlands, three-quarters of current vacancies could be filled if migrants participated in the labor market at the same rate as the native born, meaning integration policy matters as much as immigration levels themselves.

Bottom Line

Stopping or sharply reducing immigration tends to cause labor shortages especially in sectors where immigrants are heavily concentrated (construction, agriculture, hospitality, elder/child care) and especially in countries with aging populations and low native birth rates. It may modestly raise wages for some native workers in the short term, but the broader consensus among economists is that it also slows GDP growth, raises prices, and creates supply bottlenecks—effects that intensify the longer restrictive policies persist, since native population growth alone typically can't fill the gap fast enough.