Will stopping immigration cause labor shortages?

Yes, sharply reducing or stopping immigration is likely to cause or worsen labor shortages in many developed economies, especially the US, though the effects vary by sector, skill level, time horizon, and policy details (e.g., legal vs. unauthorized, skilled vs. low-skilled). This stems from demographics, the role immigrants play in the labor force, empirical evidence from recent slowdowns, and historical precedents. Economies can partially adjust via higher wages, automation, native participation, or domestic mobility, but these do not fully offset the supply shock in practice.[1]

Demographic and Structural Context

In countries like the US, the native-born working-age population (roughly 18-65) has slowed dramatically or begun shrinking due to aging (baby boomers retiring), below-replacement fertility, and related factors. US-born working-age population growth turned negative in recent periods (e.g., decline of ~270,000 per year in 2020-2023), with the sharpest drops among non-college-educated groups. Labor force participation among natives has not risen enough to compensate.[1]

Immigrants have been a major countervailing force, contributing substantially to labor force and employment growth for both high- and lower-skilled workers over decades. Foreign-born workers make up roughly 20% of the US workforce. Without immigration, the working-age population would have started shrinking earlier (as early as ~2012 in some estimates). Similar pressures exist in Europe, Japan, South Korea, and elsewhere, where low fertility and aging drive shortages; some historically low-immigration countries have expanded inflows as a result.[2]

Demand has grown in services (hospitality, food, construction, healthcare/caregiving, personal services) tied to an aging and wealthier population. These often rely heavily on non-college-educated immigrant labor. Vacancies have exceeded unemployed workers for years in tight markets.[1]

Recent Evidence from Immigration Slowdowns

Analyses of post-2024/2025 US immigration reductions (border enforcement, deportations, slower legal inflows) show material weakening of labor supply. Labor-force growth has lagged population growth; potential nonfarm payroll growth consistent with stable unemployment could fall sharply (e.g., toward <10,000–60,000/month from prior higher levels, per Barclays and others), weighing on potential GDP growth. Shortages have been reported in restaurants/hotels (hundreds of thousands of vacancies), agriculture, construction, and related fields.[3]

Immigration also tends to be disinflationary overall by boosting supply (though it adds demand); slowdowns can sustain wage/price pressures in tight markets.[7]

Effects on Native Workers and Wages

The broad economist consensus is that immigration’s long-run aggregate impact on native wages is near zero (small positive or small negative). Recent work finds positive effects on less-educated natives’ wages (e.g., +1.7% to +2.6% or +2.6% to +3.4% from 2000–2019/2023 inflows) due to complementarity, occupational upgrading, and demand effects, with little or positive employment effects and no significant crowding out for most groups. Effects on college-educated natives are typically negligible.[8]

There can be modest short-run downward pressure on the lowest-skilled natives in directly competing jobs (a small and shrinking group), depending on substitutability assumptions. However, stopping immigration does not reliably raise native wages or employment broadly in the data from recent slowdowns; firms may shrink output, raise prices, automate, or leave vacancies unfilled rather than fully substitute natives. Native geographic and occupational mobility has declined.[9]

Historical Precedents

Wartime programs like the Bracero Program were created precisely to address shortages when native labor was scarce.

Nuances, Adjustments, and Caveats

In short, with native labor force growth already weak due to demographics, stopping immigration removes a primary source of new workers and will tighten markets, produce sectoral shortages, and slow potential output growth unless offset by other policies or rapid adjustments that history and recent data suggest are incomplete. Targeted legal pathways responsive to labor needs are often proposed as a practical middle ground.