Will stopping immigration cause labor shortages?

Whether stopping immigration will cause labor shortages is one of the most debated questions in labor economics. The short answer is that it depends on the timeline and the industry.

In the short term, a sudden halt to immigration almost always triggers immediate, acute labor shortages, particularly in specific sectors. In the long term, however, the economy and the labor market attempt to adapt through structural changes like wage increases, automation, and shifts in consumer demand.

To understand how stopping immigration impacts the labor supply, it is helpful to look at the arguments and evidence from both sides of the economic debate.

1. The Argument That Stopping Immigration Will Cause Labor Shortages

Many economists, business groups, and policymakers argue that immigration is vital to keeping the modern labor market functioning. Under this view, stopping immigration creates severe, systemic labor shortages due to several key factors:

•Demographic Decline and Aging Populations: In most developed nations (including the U.S., Western Europe, and East Asia), birth rates are well below replacement levels. As the large "Baby Boomer" generation retires, there are simply not enough native-born workers entering the workforce to replace them. Immigration acts as a vital demographic buffer, supplying prime-age workers to keep the economy growing and to pay into social safety nets like Social Security and Medicare.

•Sector-Specific Dependence: Certain vital industries rely heavily on foreign-born labor. For example, in agriculture, construction, hospitality, food service, and elder care, immigrants make up a disproportionately large share of the workforce. Economists point out that domestic workers are often unwilling to take these physically demanding, low-paying, or seasonal jobs, leaving employers with immediate vacancies when immigration is restricted.

•High-Skilled Gaps: Labor shortages also occur at the top of the skill spectrum. The tech, scientific research, and healthcare sectors (such as specialized medicine) depend on highly educated foreign nationals to fill positions where domestic universities are not producing graduates fast enough to meet demand.

•The Concept of "Complementarity": Many immigrant workers do not directly compete with native-born workers; instead, they complement them. For example, having enough immigrant construction laborers allows native-born architects, plumbers, and electricians to do their jobs. A shortage of basic labor can bottleneck projects, leading to job losses or reduced hours for higher-skilled native workers.

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

Proponents of immigration restrictions, alongside some labor economists, argue that the concept of a "labor shortage" is often misunderstood. They assert that stopping immigration forces the market to correct itself in ways that can ultimately benefit domestic workers and business productivity:

•Wage Increases for Domestic Workers: In a free market, a "shortage" is often a shortage of workers at the current wage. Restrictionists argue that if employers cannot import cheaper foreign labor, they will be forced to compete for domestic workers by raising wages, offering better benefits, and improving working conditions. This can draw discouraged, unemployed, or underemployed native-born workers back into the active labor force.

•Incentive for Automation and Capital Investment: When labor is abundant and cheap, businesses have little financial incentive to invest in expensive machinery or software. If labor becomes scarce and costly, companies are incentivized to invest in productivity-enhancing technology (such as robotic harvesting in farming, self-checkout kiosks, or AI-driven administrative tools). This boosts the economic output per worker.

•Reduction in Total Consumer Demand: Immigrants are not just workers; they are also consumers of housing, groceries, healthcare, and infrastructure. Stopping immigration reduces the overall growth rate of the population. A smaller population means lower aggregate demand for goods and services, which naturally reduces the number of job openings businesses need to fill. In theory, the labor market eventually scales down to a smaller, balanced equilibrium.

3. Real-World Case Studies

We can look at recent history and different nations to see how these economic theories play out in reality:

•The COVID-19 Border Closures (2020–2021): During the pandemic, global travel restrictions effectively halted immigration to countries like the United States. This sudden stop contributed directly to the severe post-pandemic labor shortages in logistics, hospitality, and agriculture, which in turn drove up prices (inflation) as businesses struggled to find workers to meet surging consumer demand.

•Post-Brexit United Kingdom: After the UK officially left the European Union and ended the free movement of European workers, industries like trucking, agriculture, and hospitality faced acute labor shortages. While some employers raised wages, others complained they still could not find local workers and were forced to downsize operations or reduce service hours.

•Japan: Japan has historically maintained highly restrictive immigration laws while facing the world’s oldest population and a shrinking workforce. To cope, Japan heavily prioritized automation, robotics, and encouraging women and elderly citizens to enter the workforce. However, even with massive technological advancement, the labor shortage became so severe that in recent years, the Japanese government has had to gradually ease visa restrictions to bring in foreign guest workers for agriculture, caregiving, and construction.

Summary

Ultimately, stopping immigration does cause short-term labor shortages, particularly in sectors like agriculture, construction, service, and healthcare. Over the long term, the economy will adjust. However, economists generally agree that this adjustment comes with significant trade-offs: while it can drive up wages for certain low-skilled domestic workers, it also tends to slow down overall economic growth, fuel inflation as businesses pass higher labor costs onto consumers, and leave societies struggling to care for an aging population without a growing base of younger taxpayers.

Citations (14)

1econofact.orgAcademic
econofact.org
Backs: “In the short term, a sudden halt to immigration almost always triggers immediate, acute labor shortages, particularly in specific sectors.”
2migrationpolicy.orgNonprofits and think tanks
migrationpolicy.org
Backs: “In the long term, however, the economy and the labor market attempt to adapt through structural changes like wage increases, automation, and shifts in consumer demand.”
3csis.orgNonprofits and think tanks
csis.org
Backs: “Demographic Decline and Aging Populations: In most developed nations (including the U.S., Western Europe, and East Asia), birth rates are well below replacement levels.”
4cmsny.orgNonprofits and think tanks
cmsny.org
Backs: “As the large "Baby Boomer" generation retires, there are simply not enough native-born workers entering the workforce to replace them.”
5shglawpa.comNot yet classified
shglawpa.com
Backs: “Immigration acts as a vital demographic buffer, supplying prime-age workers to keep the economy growing and to pay into social safety nets like Social Security and Medicare.”
6brookings.eduNonprofits and think tanks
brookings.edu
Backs: “Immigration acts as a vital demographic buffer, supplying prime-age workers to keep the economy growing and to pay into social safety nets like Social Security and Medicare.”
7cfr.orgNonprofits and think tanks
cfr.org
Backs: “For example, in agriculture, construction, hospitality, food service, and elder care, immigrants make up a disproportionately large share of the workforce.”
8wes.orgNonprofits and think tanks
wes.org
Backs: “Economists point out that domestic workers are often unwilling to take these physically demanding, low-paying, or seasonal jobs, leaving employers with immediate vacancies when immigration is restricted.”
9equitablegrowth.orgNonprofits and think tanks
equitablegrowth.org
Backs: “The tech, scientific research, and healthcare sectors (such as specialized medicine) depend on highly educated foreign nationals to fill positions where domestic universities are not producing graduates fast enough to meet demand.”
10americanimmigrationcouncil.orgNonprofits and think tanks
americanimmigrationcouncil.org
Backs: “The Concept of "Complementarity": Many immigrant workers do not directly compete with native-born workers; instead, they complement them.”
11equitablegrowth.orgNonprofits and think tanks
equitablegrowth.org
Backs: “A shortage of basic labor can bottleneck projects, leading to job losses or reduced hours for higher-skilled native workers.”
12lse.ac.ukAcademic
lse.ac.uk
Backs: “Wage Increases for Domestic Workers: In a free market, a "shortage" is often a shortage of workers at the current wage.”
13norrismclaughlin.comNot yet classified
norrismclaughlin.com
Backs: “This boosts the economic output per worker.”
14democratic-erosion.orgAcademic
democratic-erosion.org
Backs: “To cope, Japan heavily prioritized automation, robotics, and encouraging women and elderly citizens to enter the workforce. However, even with massive technological advancement, the labor shortage became so severe that in recent years, the Japanese government has had to gradually ease visa restrictions to bring in…”