Will stopping immigration cause labor shortages?

Short answer: Yes, in many sectors — this isn't just theoretical, it's happening right now

The evidence strongly suggests that reducing immigration does cause labor shortages, particularly in specific industries. This isn't speculative—it's actively playing out in the U.S. economy in 2025-2026.

Current real-world evidence

Since the Trump administration's immigration crackdown intensified in 2025, strict immigration policies implemented in 2025 have sharply reduced net immigration flows, with some analyses indicating that for the first time in at least half a century more immigrants left the United States than entered, producing visible shortages across multiple sectors that historically rely heavily on immigrant workers.

Agriculture has been hit hardest. Experts say the agricultural industry in particular—in which 68 percent of farm laborers for fiscal year 2021–22 were foreign-born—could suffer as the administration's immigration crackdown continues. This concern isn't just academic: the Labor Department warned in October 2025 that the Trump administration's immigration policies risk creating a labor shortage in the sector.

Construction is also struggling. Construction relies heavily on immigrant workers—approximately 30% of workers in the U.S. construction industry are foreign-born, and in some states like California and Texas, the share rises to around 40%. Immigration enforcement activities and fewer workers showing up to jobs out of fear have contributed to staffing challenges. Wage data reflects this: average wage growth in July approached 8% in the construction industry, nearly double the national average—a classic sign of a labor shortage.

A regional example from South Texas illustrates the mechanism directly: construction projects are stalling, farms are losing workers and businesses along the Texas-Mexico border are struggling to fill positions as immigration enforcement intensifies, with economic effects becoming visible in communities that have long depended on immigrant labor in construction, agriculture and transportation.

The macroeconomic picture

At the national level, the Bureau of Labor Statistics incorporated new population adjustments reflecting a dramatic drop in immigration—net international migration fell from 2.7 million in July 2024 to 1.3 million in June 2025 following a wave of administration policies that expanded enforcement, restricted work visas, ended Temporary Protected Status for many immigrants, and implemented new travel bans. Fed Chair Jerome Powell himself has pointed to this: Powell 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."

Economist Mark Zandi has connected these shortages directly to price increases: he believes it's "significantly lifting the cost" in sectors that rely heavily on immigrant labor: construction, agriculture, manufacturing, transportation, distribution, hospitality, retail, elder care, child care, and other personal services. He notes "you can see it in meat prices, agriculture, food processing, haircuts, dry cleaning," calling it the "fingerprints of the restrictive immigration policy" visible in inflation data.

Why this happens: demographics

The underlying structural reason is demographic. Economists such as Jason Furman have noted that monthly job gains have fallen significantly below prior trends precisely because immigration previously filled the gap left by slow native-born population growth and retirements. Similarly, during an earlier immigration slowdown, Powell noted that "the combination of a plunge in net immigration and a surge in deaths during the pandemic probably accounts for about one-and-a-half million missing workers."

The counterargument

Not everyone agrees this is purely negative. Some officials argue restriction benefits native workers: top administration officials, including Vice President JD Vance, have argued that limiting immigration will raise wages and create more job opportunities for U.S.-born workers. There's also a longer-term efficiency argument from some economists: "Labor shortages are very healthy," said one economics professor, arguing "they force employers to use existing workers more efficiently and invest in technology, that's all good stuff."

However, the weight of recent research suggests costs outweigh these benefits. A Federal Reserve study found "a nearly one-for-one causal effect of unauthorized immigration worker flows on employment growth," with industry-level estimates suggesting recent immigration slowdowns have reduced employment disproportionately in construction and manufacturing. Longer-term projections are also stark: a October 2025 study by the nonpartisan National Foundation for American Policy estimated this could cut annual economic growth by almost one-third by 2035.

Bottom line

While immigration restriction can theoretically tighten labor markets and push up wages for native workers in direct competition with immigrants, the current U.S. experience shows that for industries heavily dependent on foreign-born labor—agriculture, construction, hospitality, food processing, and caregiving—reduced immigration does produce genuine shortages, project delays, and price increases rather than simply shifting jobs to native workers. The effect is strongest where domestic workers are unwilling or unable to quickly fill the specific roles immigrants vacate.