Will stopping immigration cause labor shortages?

Whether stopping immigration will cause labor shortages is a central debate in modern economics and public policy.

The short answer is yes—in both the short and medium term, stopping or severely restricting immigration is highly likely to cause significant labor shortages, particularly in specific industries. However, proponents of restricting immigration argue that over the long term, these shortages will force the economy to adapt in positive ways, such as through increased wages and faster automation.

1. Why Stopping Immigration Causes Labor Shortages

Most economists agree that immigration is a primary driver of labor force growth, especially in developed countries. If immigration were stopped, several factors would immediately trigger labor shortages:

•Aging Demographics: In countries like the United States, Canada, and much of Europe, birth rates are below replacement levels, and the domestic population is aging rapidly. Without a continuous influx of immigrant workers, the total size of the labor force contracts as more people retire than enter the workforce.

•High Reliance in Key Industries: Several crucial sectors of the economy are heavily dependent on foreign-born labor:

•Agriculture: In many nations, a vast majority of field-crop workers, sorters, and packers are immigrants.

•Construction: Immigrants make up nearly 30% of the construction and roofing workforce in the U.S..

•Hospitality and Services: Restaurants, hotels, and cleaning services rely heavily on immigrant labor to fill entry-level positions.

•Healthcare and Eldercare: An aging population requires a massive expansion of home health aides, nurses, and doctors. Immigrants fill a disproportionate share of these roles.

•Complementary Labor Dynamics: Economists emphasize that immigrants often do not compete directly with native-born workers; instead, they complement them. For instance, having enough agricultural or construction laborers allows a company to grow, which in turn creates higher-paying, native-dominated roles in management, logistics, marketing, and professional services. Without the base labor, those businesses cannot expand, leading to stagnant job growth for native-born workers.

2. The Counterargument: How the Market Might Adapt

Proponents of restricting immigration argue that a "labor shortage" is a temporary market imbalance rather than a permanent state. They suggest that stopping immigration would force the economy to self-correct in ways that ultimately benefit domestic workers:

•Rising Wages: In a tight labor market, employers can no longer rely on low-wage foreign labor. To attract workers, they must raise wages, improve working conditions, and offer better benefits to recruit from the domestic population.

•Incentives for Automation: A shortage of workers provides a strong financial incentive for businesses to invest in technology, robotics, and artificial intelligence. For example, farms might invest in automated harvesting machines, and meatpacking plants might adopt advanced robotics, which increases overall economic productivity.

•Activating "Idle" Labor: Higher wages and active recruitment might draw discouraged or underutilized domestic workers back into the active labor force (such as those who have dropped out of the workforce entirely).

3. What the Real-World Evidence Shows

While the theory of market adaptation sounds clean, real-world economic data and studies show that the transition is highly disruptive and often economically painful:

•Inflation and Higher Prices: When companies are forced to pay significantly higher wages or face severe worker shortages, they pass those costs onto consumers. A sudden halt in immigration historically leads to sharp price increases in housing, food, and hospitality.

•Business Failures over Automation: For many small- and medium-sized businesses (like family farms, local restaurants, or small roofing contractors), the capital cost of automation is prohibitively high. Rather than automating, many of these businesses simply scale back operations, cancel expansion plans, or go bankrupt when they cannot find workers.

•Long-Term Real Wage Declines: Paradoxically, several economic studies (including from the National Bureau of Economic Research) show that while severe restrictions on immigration might cause a small, temporary wage bump for low-skilled native workers, it actually lowers real wages in the long run. This occurs because a shrinking labor pool shrinks the overall economy, reduces consumer spending, and discourages businesses from investing capital.

•Shrinking GDP: Major nonpartisan economic analyses estimate that a permanent reduction in immigration—or mass deportation of existing undocumented workers—can contract a country's GDP by several percentage points, actively triggering economic recessions.

Conclusion

Stopping immigration will cause immediate and severe labor shortages in critical sectors of the economy. While a tight labor market can nudge employers toward raising wages or investing in automation, the transition is not seamless. The immediate results are typically higher inflation, supply chain bottlenecks, agricultural crop losses, and slower overall economic growth.

Citations (11)

1cfr.orgNonprofits and think tanks
cfr.org
Backs: “However, proponents of restricting immigration argue that over the long term, these shortages will force the economy to adapt in positive ways, such as through increased wages and faster automation.”
2agproud.comNot yet classified
agproud.com
Backs: “However, proponents of restricting immigration argue that over the long term, these shortages will force the economy to adapt in positive ways, such as through increased wages and faster automation.”
3equitablegrowth.orgNonprofits and think tanks
equitablegrowth.org
Backs: “Most economists agree that immigration is a primary driver of labor force growth, especially in developed countries. If immigration were stopped, several factors would immediately trigger labor shortages:”
4americanprogress.orgNonprofits and think tanks
americanprogress.org
Backs: “Most economists agree that immigration is a primary driver of labor force growth, especially in developed countries. If immigration were stopped, several factors would immediately trigger labor shortages:”
5wes.orgNonprofits and think tanks
wes.org
Backs: “High Reliance in Key Industries: Several crucial sectors of the economy are heavily dependent on foreign-born labor: Agriculture: In many nations, a vast majority of field-crop workers, sorters, and packers are immigrants.”
6cmsny.orgNonprofits and think tanks
cmsny.org
Backs: “High Reliance in Key Industries: Several crucial sectors of the economy are heavily dependent on foreign-born labor: Agriculture: In many nations, a vast majority of field-crop workers, sorters, and packers are immigrants.”
7agproud.comNot yet classified
agproud.com
Backs: “Agriculture: In many nations, a vast majority of field-crop workers, sorters, and packers are immigrants.”
8bakerinstitute.orgNonprofits and think tanks
bakerinstitute.org
Backs: “Hospitality and Services: Restaurants, hotels, and cleaning services rely heavily on immigrant labor to fill entry-level positions. Healthcare and Eldercare: An aging population requires a massive expansion of home health aides, nurses, and doctors.”
9forbes.comNews and mediaquality 0.83
forbes.com
Backs: “Without the base labor, those businesses cannot expand, leading to stagnant job growth for native-born workers.”
10roofingcontractor.comNot yet classified
roofingcontractor.com
Backs: “Incentives for Automation: A shortage of workers provides a strong financial incentive for businesses to invest in technology, robotics, and artificial intelligence. For example, farms might invest in automated harvesting machines, and meatpacking plants might adopt advanced robotics, which increases overall economic…”
11house.govGovernment
house.gov
Backs: “For example, farms might invest in automated harvesting machines, and meatpacking plants might adopt advanced robotics, which increases overall economic productivity. Activating "Idle" Labor: Higher wages and active recruitment might draw discouraged or underutilized domestic workers back into the active labor force…”