Will stopping immigration cause labor shortages?

Whether stopping immigration will cause labor shortages is one of the most heavily debated questions in economics.

The consensus among mainstream economists and business groups is that a sudden halt to immigration will cause immediate and severe labor shortages, particularly in specific industries and in countries with aging populations. However, proponents of immigration restrictions and some heterodox economists argue that the labor market would eventually adjust through higher wages, increased automation, and domestic recruitment.

A balanced look at both sides of the debate, supported by economic theory and real-world examples, highlights the complexities of this issue.

The Case That Stopping Immigration Will Cause Labor Shortages

Most economists argue that stopping immigration is a recipe for widespread labor shortages due to demographic realities and industry-specific demands:

In most developed nations, birth rates are well below the replacement level, and the native-born population is rapidly aging. As Baby Boomers retire, there are simply not enough young, native-born workers entering the workforce to replace them. Without immigration to inject working-age individuals into the economy, the sheer size of the labor force shrinks, making long-term labor shortages mathematically inevitable.

Certain sectors are disproportionately staffed by foreign-born workers. These include:

Stopping immigration would immediately leave these sectors with millions of unfilled positions.

We have seen what happens when immigration abruptly slows down:

A common misconception is that there is a fixed number of jobs in an economy, and immigrants "take" those jobs. In reality, immigrants are not just workers (labor supply); they are also consumers (labor demand). They buy groceries, rent apartments, and pay taxes, which creates more jobs. Stopping immigration reduces overall consumer demand, which can lead to business closures and a contracting economy, rather than a surplus of jobs for native-born workers.

The Case That stopping Immigration Will Not Cause Permanent Shortages

Proponents of immigration restrictions argue that "labor shortages" are often a symptom of wages being kept artificially low. They believe the market would naturally correct itself without foreign labor:

According to basic supply-and-demand economic theory, if the supply of labor decreases, the price of labor (wages) must rise. Proponents of restrictions argue that a lack of immigration would force businesses to raise wages and offer better benefits and working conditions to attract native-born workers who are currently on the sidelines (such as discouraged workers, retirees, or youth).

When labor is cheap and abundant, businesses have little incentive to invest in expensive technology. If immigration stops and labor becomes scarce and expensive, businesses are forced to innovate. For example, farms might invest in robotic fruit-harvesters, and restaurants might adopt automated ordering systems. In the long run, this increases productivity per worker, allowing the economy to produce the same output with fewer actual people.

Some economists point out that if certain businesses cannot survive without extremely low-wage, immigrant labor, those businesses may close or downsize. While this is painful in the short term, it can redirect domestic workers toward higher-paying, more productive sectors of the economy.

The Reality: Short-Term Pain vs. Long-Term Adjustments

Ultimately, the impact of stopping immigration depends on the timeframe: