Will stopping immigration cause labor shortages?

Whether stopping or severely restricting immigration will cause labor shortages is one of the most hotly debated questions in modern economics. The answer depends heavily on how "labor shortage" is defined, the sectors involved, and the timeframe being analyzed (short-term vs. long-term).

Economists, business groups, and labor advocates generally fall into two main camps on this issue.

Perspective 1: Yes, stopping immigration causes severe labor shortages

Mainstream economists, business associations, and policy researchers argue that restricting immigration leads to persistent, damaging labor shortages that slow economic growth and fuel inflation. Their arguments are built on several key points:

1.Demographics and an Aging Population: Many developed countries, including the United States, are facing declining birth rates and rapidly aging workforces as Baby Boomers retire. Without a steady influx of younger, working-age immigrants, the overall labor force naturally shrinks. This makes it difficult for businesses to expand and puts a strain on social safety nets.

2.Heavy Reliance in Key Sectors: Certain industries are deeply dependent on immigrant labor. For example:

•Agriculture: In the U.S., a vast majority of field hand workers are foreign-born.

•Construction & Hospitality: Immigrants represent a disproportionate share of construction laborers, hotel staff, and food service workers.

•Healthcare & Caregiving: An aging population has created a massive demand for home health aides and eldercare workers, many of whom are immigrants.

Sudden declines in immigration can leave these sectors with immediate, unfilled job openings.

3.The "Lump of Labor" Fallacy: Proponents of this view point out that jobs are not a fixed pie. Immigrants are not just workers; they are also consumers who buy groceries, rent apartments, and use services. When immigration is halted, consumer demand drops. Furthermore, high-skilled immigrants (particularly in STEM fields) often act as innovators who create more jobs for native-born workers. Removing them can force businesses to downsize or close entirely, which can paradoxically increase unemployment among native-born workers.

4.Inflationary Pressures: When the supply of labor drops sharply, businesses must compete for a smaller pool of workers by raising wages. While this benefits individual workers, businesses often pass these higher labor costs on to consumers in the form of higher prices, contributing to inflation.

Perspective 2: No, the market will adjust, raising wages and productivity

Restrictionist economists, some worker advocates, and organizations like the Center for Immigration Studies (CIS) argue that a "labor shortage" is a myth in a free-market economy. They contend that stopping immigration does not create a permanent shortage, but rather forces a necessary and beneficial economic correction:

1.A "Shortage of Cheap Labor": Proponents of this view argue that when employers complain of a labor shortage, they actually mean a shortage of workers willing to work for the low wages they want to pay. In a free market, if labor is scarce, the price of labor (wages) must rise. Restricting immigration forces employers to offer higher pay and better working conditions to attract domestic workers.

2.Activating the Domestic Labor Force: Tighter labor markets provide a strong incentive for companies to recruit marginalized or underemployed domestic populations. This includes workers without college degrees, younger workers, and individuals who have dropped out of the labor force entirely.

3.Spurring Automation and Innovation: Access to an endless supply of cheap labor can make businesses lazy, disincentivizing them from investing in technology. When immigration is restricted, businesses are forced to invest in labor-saving machinery, robotics, and automation. Over the long term, this capital investment increases overall economic productivity.

4.Domestic Willingness to Work: Studies from restrictionist groups show that native-born workers already comprise the majority of the workforce in nearly all "stereotypically immigrant" jobs (such as janitorial services, construction, and food prep), particularly in metropolitan areas with low immigration. This suggests that domestic workers are willing to perform these jobs when they are compensated fairly.

What Historical and Empirical Evidence Shows

Real-world scenarios offer a mixed picture of how these dynamics play out:

•Short-Term Pain vs. Long-Term Adjustment: Historically, a sudden, rapid halt to immigration (such as during the COVID-19 pandemic border closures or sudden policy changes) does cause immediate, painful labor shortages in specific sectors. Crops may rot in fields, and construction projects may halt because businesses cannot automate operations overnight.

•The 1920s Precedent: Economic historians studying the U.S. immigration quotas of the 1920s—which slashed immigration by over 80%—found that the restrictions did not automatically result in higher wages for native-born workers. Instead, the sudden drop in labor accelerated automation in rural agriculture and pushed urban manufacturing toward high-skilled processes. It also triggered internal migration (e.g., of Black workers from the American South to Northern cities), which kept wages from rising significantly in urban centers.

•Macroeconomic Contraction: Most modern macroeconomic models (including those from nonpartisan groups like the Congressional Budget Office and the National Bureau of Economic Research) suggest that while restricting immigration might marginally raise wages for certain low-skilled domestic workers in the very short term, the long-term result of a flat-out halt is a smaller overall economy (lower GDP), reduced consumer demand, and fewer total jobs.

Citations (15)

1americanimmigrationcouncil.orgNonprofits and think tanks
americanimmigrationcouncil.org
Backs: “Demographics and an Aging Population: Many developed countries, including the United States, are facing declining birth rates and rapidly aging workforces as Baby Boomers retire.”
2conference-board.orgNonprofits and think tanks
conference-board.org
Backs: “Demographics and an Aging Population: Many developed countries, including the United States, are facing declining birth rates and rapidly aging workforces as Baby Boomers retire.”
3wes.orgNonprofits and think tanks
wes.org
Backs: “Without a steady influx of younger, working-age immigrants, the overall labor force naturally shrinks.”
4equitablegrowth.orgNonprofits and think tanks
equitablegrowth.org
Backs: “Heavy Reliance in Key Sectors: Certain industries are deeply dependent on immigrant labor.”
5cfr.orgNonprofits and think tanks
cfr.org
Backs: “For example: Agriculture: In the U.S., a vast majority of field hand workers are foreign-born.”
6econofact.orgAcademic
econofact.org
Backs: “Sudden declines in immigration can leave these sectors with immediate, unfilled job openings.”
7forbes.comNews and mediaquality 0.83
forbes.com
Backs: “The "Lump of Labor" Fallacy: Proponents of this view point out that jobs are not a fixed pie.”
8facebook.comSocial media and video
facebook.com
Backs: “The "Lump of Labor" Fallacy: Proponents of this view point out that jobs are not a fixed pie.”
9cis.orgNonprofits and think tanks
cis.org
Backs: “Perspective 2: No, the market will adjust, raising wages and productivity. Restrictionist economists, some worker advocates, and organizations like the Center for Immigration Studies (CIS) argue that a "labor shortage" is a myth in a free-market economy.”
10cis.orgNonprofits and think tanks
cis.org
Backs: “Perspective 2: No, the market will adjust, raising wages and productivity. Restrictionist economists, some worker advocates, and organizations like the Center for Immigration Studies (CIS) argue that a "labor shortage" is a myth in a free-market economy.”
11cis.orgNonprofits and think tanks
cis.org
Backs: “A "Shortage of Cheap Labor": Proponents of this view argue that when employers complain of a labor shortage, they actually mean a shortage of workers willing to work for the low wages they want to pay.”
12cis.orgNonprofits and think tanks
cis.org
Backs: “In a free market, if labor is scarce, the price of labor (wages) must rise.”
13princeton.eduAcademic
princeton.edu
Backs: “Spurring Automation and Innovation: Access to an endless supply of cheap labor can make businesses lazy, disincentivizing them from investing in technology.”
14cis.orgNonprofits and think tanks
cis.org
Backs: “Over the long term, this capital investment increases overall economic productivity.”
15cfr.orgNonprofits and think tanks
cfr.org
Backs: “Macroeconomic Contraction: Most modern macroeconomic models (including those from nonpartisan groups like the Congressional Budget Office and the National Bureau of Economic Research) suggest that while restricting immigration might marginally raise wages for certain low-skilled domestic workers in the very short…”