Will stopping immigration cause labor shortages?

Whether stopping immigration causes labor shortages depends on the economy's demographic and workforce conditions, but in many developed countries with aging populations, there's substantial evidence that sharply reduced immigration does contribute to labor shortages. Let me search for current information on this topic.## Short answer: Often yes — especially in economies with aging populations and tight labor markets, though effects vary by sector and the counterargument deserves consideration.

Current real-world evidence (U.S., 2025–2026)

The clearest recent test case is the U.S. under the Trump administration's 2025 immigration crackdown, which offers substantial data:

Labor force has actually shrunk. The total U.S. labor force — including immigrants and native-born workers — has fallen for three consecutive months, declining by 402,000 people from January to July, to about 170.3 million. Fed Chair Jerome Powell himself cited immigration policy as a factor behind the slowdown in the labor supply, saying "because of immigration policy really, the flow into our labor forces is just a great deal slower."

Sector-specific shortages are well documented:

Broader economic projections are stark. A study from the National Foundation for American Policy projects the Trump administration's immigration crackdown could reduce the U.S. workforce by 6.8 million people by 2028 and by 15.7 million by 2035, and notably projected new workers entering the workforce wouldn't fully make up the difference, leading to net reductions. Economists Edelberg, Watson, and Veuger similarly calculated that the loss of foreign workers will mean that monthly U.S. job growth "could be near zero or negative in the next few years."

Why this happens: demographics matter

The underlying reason immigration restriction tends to cause shortages in countries like the U.S. is structural, not cyclical: the economy increasingly relies on immigrants to fuel population and labor force growth given demographic trends among the U.S.-born populace, like retirements among baby boomers and lower fertility rates. This is echoed in Federal Reserve research showing U.S. labor markets have experienced unprecedented labor shortages, and reduced immigration flows have contributed to these labor supply shortages and tightened labor markets — with industries, occupations, and regions that rely more heavily on foreign workers particularly affected.

The counterargument

Restrictionist advocates argue immigrants aren't a net addition to labor supply because they also consume goods and services, creating demand for their own labor — essentially that a new immigrant uses almost as much labor as they contribute, so large-scale immigration mainly affects wage composition rather than solving aggregate shortages. Some administration officials have made a similar claim domestically: Vice President JD Vance and others have argued that limiting immigration will raise wages and create more job opportunities for U.S.-born workers, contending that these workers are available to counter labor shortages.

However, the empirical pattern so far doesn't support this substitution happening smoothly. Employers across many sectors are calling for more workers than the domestic labor pool can currently provide, and reductions in the foreign-born workforce are not being offset by higher employment among U.S.-born workers.

Bottom line

In economies with aging populations and low native birth rates (like the U.S., much of Europe, Japan, etc.), sharply restricting immigration tends to produce real, measurable labor shortages — particularly in agriculture, construction, hospitality, and caregiving — because domestic labor supply alone isn't growing fast enough to replace retiring workers. The 2025 U.S. experience is turning into something close to a live natural experiment on this question, and the early data leans toward confirming the shortage effect, though the long-run wage and employment effects for native workers remain debated among economists.