Will stopping immigration cause labor shortages?

Whether stopping immigration will cause labor shortages is one of the most hotly debated questions in labor economics. The short answer is that it depends on how the economy adjusts over time.

In the short term, economic consensus and historical evidence suggest that a sudden halt to immigration leads to acute labor shortages in specific industries. In the long term, however, some economists argue that the market eventually adjusts through wage increases, automation, and the mobilization of domestic workers—though this often comes at the cost of a smaller overall economy.

The two primary perspectives on how stopping immigration affects the labor market highlight different aspects of this economic dynamic.

The Argument That It Will Cause Labor Shortages

Most mainstream economists, business groups, and demographic researchers argue that stopping immigration will lead to persistent, damaging labor shortages. Their reasoning is based on several factors:

1. Demographic Realities (Aging Populations)

In most developed nations, birth rates are well below the replacement level, and the native-born population is aging rapidly. Without immigration, the total size of the workforce shrinks. This creates a structural shortage where there are simply not enough working-age people to support the growing number of retirees and fill vacant roles.

2. Sector-Specific Reliance

Certain industries are overwhelmingly dependent on foreign-born labor. For example, in the United States, immigrants make up a massive share of the workforce in:

3. The "Complementarity" of Labor

Economists point out that immigrant and native-born workers are rarely perfect substitutes for one another. Instead, they are often complementary. For example, hiring low-skilled immigrant construction workers allows a firm to expand, which in turn creates higher-paying, managerial, or specialized jobs for native-born workers (such as project managers, accountants, and engineers). When immigration stops, the inability to hire basic laborers can cause projects to halt entirely, leading to job losses or wage stagnation for the native-born workers who depend on them.

4. The Job-Multiplier Effect

High-skilled immigrants (e.g., in STEM fields) drive innovation, start businesses, and file patents. Studies show that high-skilled immigrants have a "job multiplier" effect, creating additional jobs in local economies by expanding businesses and increasing demand for goods and services. Stopping this flow reduces overall economic dynamism and job creation.

The Argument That It Won't Cause Long-Term Shortages

Proponents of restricting immigration, along with some labor economists (such as George Borjas), argue that the concept of a permanent "labor shortage" is a myth in a free-market economy. They argue that stopping immigration forces positive structural adjustments:

1. The Market Clearing Mechanism (Wage Increases)

According to standard economic theory, a "labor shortage" is simply a sign that employers are not offering high enough wages to attract workers. If the supply of cheap foreign labor is cut off, employers are forced to compete for the remaining pool of native-born workers. To attract these workers, businesses must raise wages and improve working conditions. Thus, the "shortage" disappears as the market adjusts to a new, higher wage equilibrium.

2. Incentivizing Automation and Productivity

When labor is cheap and abundant, businesses have little incentive to invest in expensive technology. If immigration stops and labor becomes scarce, businesses are forced to innovate. For example, instead of relying on seasonal hand-pickers, agricultural firms may invest in automated harvesting machines. This boosts overall economic productivity, allowing the same amount of work to be done with fewer human hands.

3. Mobilizing Underutilized Domestic Workers

Some restrictionists argue that ready access to immigrant labor allows policymakers and employers to ignore millions of native-born citizens who have dropped out of the labor force (such as prime-age men without college degrees, individuals with criminal records, or those living in economically depressed regions). Restricting immigration could force a national focus on retraining, rehabilitating, and reintegrating these underutilized domestic populations into the workforce.

What Does the Evidence Show?

Historical precedents and economic studies provide insight into what actually happens when immigration is sharply restricted:

Conclusion

Stopping immigration will cause immediate and severe labor shortages in industries heavily reliant on foreign labor, such as agriculture, hospitality, eldercare, and construction.

In the long run, the economy will adapt, but not without trade-offs. While some domestic workers might see modest wage increases in specific sectors, businesses will likely adapt by automating tasks, scaling back production, or raising prices for consumers to cover higher labor costs. Ultimately, most economists agree that stopping immigration altogether results in a smaller, less dynamic, and slower-growing economy, rather than a simple shift of existing jobs to native-born workers.