Will stopping immigration cause labor shortages?

Yes, stopping or severely reducing immigration is widely understood by economists to cause significant labor shortages. Because foreign-born workers play a vital role in modern economies, restricting their entry creates immediate and long-term supply-demand imbalances in the labor market.

1. Why Stopping Immigration Causes Labor Shortages

The primary drivers connecting immigration reductions to labor shortages are demographic shifts and the nature of modern employment:

•Demographic Decline: Most developed countries, including the United States, are facing rapidly aging populations, retiring Baby Boomers, and declining birth rates. Without immigration, the domestic labor force in these nations is projected to shrink, leaving more job openings than there are native-born workers to fill them.

•Job Complementarity: Economists emphasize that immigrant and native-born workers rarely compete for the exact same jobs; instead, their roles are complementary. Native-born workers are more heavily represented in management, professional, and office roles, while foreign-born workers are highly represented in service, agricultural, and construction roles. When immigration stops, the complementary roles that support high-skilled jobs disappear, which can drag down overall employment.

2. Sectors Most Vulnerable to Shortages

When immigration slows, certain labor-intensive sectors experience severe and immediate disruptions:

•Agriculture: The agricultural sector relies heavily on immigrant labor; more than a quarter of all agricultural workers (and over 50% of product graders and sorters) are foreign-born. Stopping immigration immediately leaves crops unharvested and drives up food prices.

•Construction: Nearly 29% of construction workers are immigrants. Restricting immigration halts infrastructure and housing projects, worsening existing housing shortages and driving up real estate costs.

•Healthcare and Elder Care: Facing an aging population, the healthcare sector relies on foreign-born workers to fill roughly 16% of nursing jobs and 28% of health-care aide slots.

•Leisure, Hospitality, and Service: These sectors operate on thin margins and rely on seasonal or low-wage immigrant labor.

•High-Tech and STEM: High-skilled immigrants drive innovation. A lack of high-skilled immigration reduces the talent pool for technology companies, which historically has had a positive "multiplier effect" in creating secondary domestic jobs.

3. Real-World Evidence and Historical Precedents

Modern economic data and historical events provide clear evidence of what happens when immigration is halted:

•The COVID-19 Pandemic (2020–2022): Due to border closures and policy changes, net immigration into the U.S. essentially flatlined, resulting in roughly 2 million "missing" working-age immigrant workers. Concurrently, the vacancy-to-unemployment (V-U) ratio spiked, indicating an incredibly tight labor market. When immigration rebounded in late 2022 and 2023, the Federal Reserve noted that the influx of foreign-born labor successfully resolved these acute shortages and helped cool inflation.

•The 1920s Border Closures: When the U.S. enacted highly restrictive immigration quotas in the 1920s, economic historians found that native-born workers did not benefit. Instead, urban areas filled the void with internal migrants, while rural farms shifted to capital-intensive machinery, and labor-intensive industries (like mining) simply contracted because they could not find workers.

4. The Economic Ripple Effects of Immigration Halts

When businesses face persistent labor shortages due to stopped immigration, the wider economy reacts in several ways:

•Inflationary Pressures: When companies cannot find workers, they must raise wages to compete. Because these wage increases are driven by labor scarcity rather than increased productivity, companies pass these higher labor costs onto consumers, causing persistent inflation.

•Reduced Investment and Business Closures: When businesses cannot find workers, they do not expand. They invest less in new projects, open fewer locations, or—especially in the case of small businesses that cannot afford to automate—go out of business entirely.

•Long-Term Native Wage Contraction: While restrictionists argue that halting immigration raises wages for native-born workers, National Bureau of Economic Research (NBER) studies suggest any wage increase is tiny and temporary. In the long run, because a smaller workforce leads to less capital investment and a shrinking economy, native-born wages actually fall overall.

5. How Economies Adjust (The Nuances)

While stopping immigration causes acute labor shortages, the market eventually adjusts, though often with painful trade-offs:

1.Automation: Labor scarcity incentivizes firms to invest in technology (like robotic harvesting in agriculture or self-checkout in retail). However, automation requires significant capital, which favors large corporations and can decimate small businesses.

2.Offshoring: If companies cannot import the workers they need, they may offshore their operations to countries where labor is abundant.

3.Consolidation: Smaller businesses that rely on low-cost labor may close down, leading to more concentrated, less competitive markets dominated by massive corporations.

Citations (10)

1forbes.comNews and mediaquality 0.83
forbes.com
Backs: “Yes, stopping or severely reducing immigration is widely understood by economists to cause significant labor shortages. Because foreign-born workers play a vital role in modern economies, restricting their entry creates immediate and long-term supply-demand imbalances in the labor market.”
2equitablegrowth.orgNonprofits and think tanks
equitablegrowth.org
Backs: “Yes, stopping or severely reducing immigration is widely understood by economists to cause significant labor shortages. Because foreign-born workers play a vital role in modern economies, restricting their entry creates immediate and long-term supply-demand imbalances in the labor market.”
3cmsny.orgNonprofits and think tanks
cmsny.org
Backs: “Yes, stopping or severely reducing immigration is widely understood by economists to cause significant labor shortages. Because foreign-born workers play a vital role in modern economies, restricting their entry creates immediate and long-term supply-demand imbalances in the labor market.”
4stanford.eduAcademic
stanford.edu
Backs: “Job Complementarity: Economists emphasize that immigrant and native-born workers rarely compete for the exact same jobs; instead, their roles are complementary.”
5wes.orgNonprofits and think tanks
wes.org
Backs: “Construction: Nearly 29% of construction workers are immigrants.”
6lse.ac.ukAcademic
lse.ac.uk
Backs: “Leisure, Hospitality, and Service: These sectors operate on thin margins and rely on seasonal or low-wage immigrant labor.”
7hbs.eduAcademic
hbs.edu
Backs: “Leisure, Hospitality, and Service: These sectors operate on thin margins and rely on seasonal or low-wage immigrant labor.”
8econofact.orgAcademic
econofact.org
Backs: “High-Tech and STEM: High-skilled immigrants drive innovation.”
9frbsf.orgGovernment
frbsf.org
Backs: “The COVID-19 Pandemic (2020–2022): Due to border closures and policy changes, net immigration into the U.S. essentially flatlined, resulting in roughly 2 million "missing" working-age immigrant workers. Concurrently, the vacancy-to-unemployment (V-U) ratio spiked, indicating an incredibly tight labor market.”
10hannahrubinton.comNot yet classified
hannahrubinton.com
Backs: “Concurrently, the vacancy-to-unemployment (V-U) ratio spiked, indicating an incredibly tight labor market. When immigration rebounded in late 2022 and 2023, the Federal Reserve noted that the influx of foreign-born labor successfully resolved these acute shortages and helped cool inflation.”