Will stopping immigration cause labor shortages?

Whether stopping immigration will cause labor shortages is a central question in modern economics. The short answer is yes, in the short-to-medium term, stopping immigration almost certainly causes acute labor shortages, particularly in developed economies with aging populations.

However, over the long term, the economy adjusts. Whether those adjustments—such as wage increases, inflation, and automation—are beneficial or harmful is a subject of intense debate among economists, policymakers, and business owners.

Here is a breakdown of how stopping immigration affects the labor market, looking at both the immediate shortages and the long-term structural shifts.

1. Why Stopping Immigration Causes Labor Shortages

In the immediate aftermath of restricting immigration, many sectors of the economy experience severe hiring difficulties. This happens for several key reasons:

•The Demographic Cliff: Most developed nations (including the U.S., Canada, member states of the EU, Japan, and South Korea) have birth rates well below the replacement level of 2.1 births per woman. As the large "Baby Boomer" generation retires, there are simply not enough young, native-born workers entering the workforce to replace them. Immigration acts as a vital demographic buffer to keep the workforce from shrinking.

•The "Essential" and Low-Wage Job Deficit: Immigrant workers make up a disproportionately large share of "hands-on" industries such as agriculture, food processing, hospitality, construction, and elder care. Many of these roles are physically demanding and offer low pay. Even during periods of unemployment, native-born workers are often highly reluctant to take these jobs due to geographic mismatch, working conditions, or reservation wages (the minimum wage a worker requires to accept a job).

•High-Skilled Labor Gaps: Modern economies rely on global talent to fuel highly specialized sectors, particularly in STEM (Science, Technology, Engineering, and Math) and healthcare. Medical fields, in particular, rely heavily on foreign-born doctors and nurses to meet the demands of an aging population. Stopping immigration immediately bottlenecks these specialized industries.

2. How the Economy Adjusts (Why the Shortages Might Change)

If immigration is halted, the market does not remain static; it adapts to the sudden drop in labor supply. Economists who advocate for lower immigration argue that these market corrections can ultimately benefit native-born workers:

•Wage Growth: Standard economic theory dictates that when the supply of labor drops, the price of labor (wages) must rise. To attract workers from a limited pool, businesses are forced to offer higher pay, better benefits, and improved working conditions. This can draw inactive domestic workers (such as retirees, students, or discouraged workers) back into the labor force.

•Investment in Automation: When labor is cheap and plentiful, businesses have less incentive to invest in costly technologies. A severe labor shortage forces companies to innovate. For example, a farm facing a shortage of fruit pickers may invest in automated harvesting machinery, or a restaurant might implement digital ordering kiosks. This increases overall productivity.

•Decreased Demand for Services: Immigrants are not just workers; they are also consumers who buy groceries, rent apartments, buy cars, and use public services. Stopping immigration slows population growth, which eventually reduces the overall demand for goods and services. With fewer consumers to serve, businesses require fewer employees, which can naturally close some of the labor gap.

3. Real-World Case Studies

We can look at recent history to see how these theories play out in reality.

The United Kingdom (Post-Brexit)

Following Brexit, the UK ended the free movement of EU citizens, resulting in a sharp drop in low-skilled European labor.

•The Result: The UK quickly faced severe labor shortages in trucking (heavy goods vehicle drivers), agriculture, hospitality, and social care. Supermarket shelves went empty, and crops were left to rot in fields.

•The Adjustment: While some businesses increased wages or automated, others simply shrunk their operations or raised prices for consumers, contributing to inflation. Ultimately, to keep the economy moving, the UK government was forced to carve out special visa schemes to bring in non-EU workers for specific sectors like agriculture.

Japan

For decades, Japan maintained incredibly strict immigration policies despite having one of the oldest populations in the world.

•The Result: Japan pioneered advanced robotics and automation to cope with its shrinking workforce. However, automation could not fully solve the crisis, particularly in high-touch sectors like elder care, agriculture, and convenience stores.

•The Adjustment: Facing a severe economic drag and empty rural towns, Japan’s government has gradually dismantled its historic resistance to foreign labor, creating new visa pathways to actively recruit hundreds of thousands of blue-collar foreign workers.

The United States (Post-Pandemic)

During the COVID-19 pandemic (2020–2022), legal immigration to the U.S. plummeted due to border closures and administrative backlogs.

•The Result: Economists, including officials at the Federal Reserve, pointed to this sudden "immigration deficit" of roughly 2 million workers as a primary driver of the historic post-pandemic labor shortage and subsequent inflation. Businesses had to aggressively hike wages to find workers, the cost of which was passed on to consumers in the form of higher prices.

Conclusion

Will stopping immigration cause labor shortages? In the near term, the answer is unequivocally yes. It creates immediate, painful disruptions in agriculture, healthcare, hospitality, and construction.

In the long term, the economy will find a new equilibrium. However, this equilibrium often comes with a trade-off: while it may lead to higher wages for some lower-income domestic workers and accelerate automation, it also typically results in higher prices (inflation) for consumers, reduced economic growth, and the downsizing or closure of businesses that cannot afford to automate or pay higher wages.

Citations (9)

1equitablegrowth.orgNonprofits and think tanks
equitablegrowth.org
Backs: “The short answer is yes, in the short-to-medium term, stopping immigration almost certainly causes acute labor shortages, particularly in developed economies with aging populations.”
2csis.orgNonprofits and think tanks
csis.org
Backs: “The short answer is yes, in the short-to-medium term, stopping immigration almost certainly causes acute labor shortages, particularly in developed economies with aging populations.”
3reddit.comForums and Q&A
reddit.com
Backs: “The Demographic Cliff: Most developed nations (including the U.S., Canada, member states of the EU, Japan, and South Korea) have birth rates well below the replacement level of 2.1 births per woman. As the large "Baby Boomer" generation retires, there are simply not enough young, native-born workers entering the…”
4bakerinstitute.orgNonprofits and think tanks
bakerinstitute.org
Backs: “The "Essential" and Low-Wage Job Deficit: Immigrant workers make up a disproportionately large share of "hands-on" industries such as agriculture, food processing, hospitality, construction, and elder care. Many of these roles are physically demanding and offer low pay.”
5verfassungsblog.deAcademic
verfassungsblog.de
Backs: “Many of these roles are physically demanding and offer low pay. Even during periods of unemployment, native-born workers are often highly reluctant to take these jobs due to geographic mismatch, working conditions, or reservation wages (the minimum wage a worker requires to accept a job).”
6migrationpolicy.orgNonprofits and think tanks
migrationpolicy.org
Backs: “Even during periods of unemployment, native-born workers are often highly reluctant to take these jobs due to geographic mismatch, working conditions, or reservation wages (the minimum wage a worker requires to accept a job). High-Skilled Labor Gaps: Modern economies rely on global talent to fuel highly specialized…”
7ox.ac.ukAcademic
ox.ac.uk
Backs: “A severe labor shortage forces companies to innovate. For example, a farm facing a shortage of fruit pickers may invest in automated harvesting machinery, or a restaurant might implement digital ordering kiosks.”
8whiterose.ac.ukAcademic
whiterose.ac.uk
Backs: “This increases overall productivity. Decreased Demand for Services: Immigrants are not just workers; they are also consumers who buy groceries, rent apartments, buy cars, and use public services.”
9europa.euGovernment
europa.eu
Backs: “The United Kingdom (Post-Brexit). Following Brexit, the UK ended the free movement of EU citizens, resulting in a sharp drop in low-skilled European labor. The Result: The UK quickly faced severe labor shortages in trucking (heavy goods vehicle drivers), agriculture, hospitality, and social care.”