Will stopping immigration cause labor shortages?

Will Stopping Immigration Cause Labor Shortages?

Based on substantial evidence—especially the real-world "natural experiment" happening in the US right now—yes, reducing immigration significantly tends to cause labor shortages, particularly in certain sectors. Here's what the evidence shows:

Why Immigration Matters So Much to Labor Supply

Immigration has become the primary driver of U.S. labor force growth. Immigration has accounted for almost half of U.S. labor force growth since 1995. More strikingly, immigrant workers were responsible for 84.7% of the labor force growth in America between 2019 and 2024. This matters because a shrinking inflow of working-age adults reduces labor force growth at a time when native-born population growth is stagnating, due to aging and low birth rates among the native-born population.

Real-World Evidence from 2025-2026

The U.S. has essentially run a live experiment on this question, and the results are informative:

Overall labor market effects: The sudden change to immigration policy in 2025 has resulted in little or even negative net migration to the US and has meant a sharp reduction in employment growth, consistent with a stable national unemployment rate. One analysis found this shift would reduce GDP growth in 2025 by 0.3-0.4 percentage points as potential growth in employment is cut from 140,000-180,000 jobs a month in 2024 to 10,000-40,000 jobs a month in the second half of 2025.

Did native-born workers fill the gap? Not really. The unemployment rate for U.S.-born workers increased from 4.3% in January 2025 to 4.7% in January 2026, while the number of foreign-born workers dropped by 122,000. Contrary to what Trump administration officials predicted, U.S.-born workers did not prosper from fewer foreign-born workers in the labor force. U.S. workers also did not reenter the labor market as the number of foreign-born workers fell. In fact, the labor force participation rate for U.S.-born individuals aged 16 and older declined from 61.4% in January 2025 to 61.2% in January 2026.

Sectors Hit Hardest

Certain industries rely heavily on immigrant labor and are experiencing acute shortages:

Construction: The Associated General Contractors of America estimates 35% of construction workers are immigrants. A recent survey found dramatic escalation of impact: about two-thirds of construction companies reported that immigration enforcement was impacting their workforce, a dramatic expansion of impact in just one year, compared to 23% in March and 13% a year prior. One industry economist noted "If the supply of immigrants is cut off, as it seems to be with the borders effectively closed these days, I think it will get much harder for the construction industry to fill positions."

Agriculture: Experts say the agricultural industry—in which 68 percent of farm laborers for fiscal year 2021-22 were foreign-born—could suffer as immigration crackdown continues. The Labor Department warned in October 2025 that the Trump administration's immigration policies risk creating a labor shortage in the sector. The government itself acknowledged this in a regulatory filing, stating that enforcement actions result in significant disruptions to production costs and threatening the stability of domestic food production and prices for U.S. consumers.

Manufacturing and other sectors: More than 20 percent of manufacturing workers are immigrants, many of whom have specialized skills that will take years to replace. Beyond these headline sectors, immigrants play outsized roles elsewhere: immigrant workers account for 43 percent of farm workers, 30 percent of food production and processing workers, 28 percent of construction workers, 22 percent of workers in personal services, and 20 percent of workers in the leisure and hospitality sector.

Broader Economic Consequences

The shortages aren't isolated—they ripple through the economy:

Important Nuance

It's worth noting this isn't universal across the whole economy. One recent analysis cautions: some estimates attribute between 40% and 60% of the slowdown in non-farm job creation observed during 2025 to reduced immigration, although the broader weakening of the demand for labor also played a significant role. While there is currently no widespread labour shortage or any significant impact on overall wages, the effects are already visible in certain sectors and regions where the percentage of foreign labour is higher.

Bottom Line

The evidence strongly suggests that sharply reducing immigration does cause labor shortages—but the effects are concentrated rather than uniform. Industries that have historically relied heavily on immigrant labor (construction, agriculture, food processing, manufacturing, hospitality) feel the pinch most acutely, while claims that native-born workers would simply "fill the gap" have not been borne out by the data so far. The broader macroeconomic effect is slower labor force and GDP growth, since immigration has been the main engine of U.S. workforce growth given an aging native-born population.