Warning Signs of the Economic Harms from Deportations

Research reveals deportations cause labor shortages and economic losses in key industries like construction and agriculture.

Paper reviewed:

Lynch, Robert G. and Ettlinger, Michael and Sifre, Emma, Warning Signs of the Economic Harms from Deportations (August 09, 2025). Available at SSRN: https://ssrn.com/abstract=5384966 or http://dx.doi.org/10.2139/ssrn.5384966

Summary

A new study highlights the economic consequences of deportations, including labor shortages and production declines in construction, agriculture, and leisure industries, resulting in significant economic losses.

Key Findings

The construction industry is experiencing labor shortages and production declines due to reduced availability of unauthorized immigrant workers, with states having high concentrations of unauthorized immigrants seeing a 0.1% drop in construction employment from June 2024 to June 2025, while other states saw a 1.9% growth.
The agricultural sector is heavily reliant on unauthorized labor, with 42% of hired crop farmworkers being unauthorized immigrants; agricultural employment decreased by 155,000 or -6.5% from March to July 2025, a stark contrast to the increases seen in the same period in 2023 and 2024.
The leisure and hospitality industry, which employs 7% unauthorized immigrants, is facing staffing difficulties and lost revenue due to deportations, with states having high concentrations of unauthorized immigrants experiencing slower employment growth (1.0%) compared to other states (1.3%) from June 2024 to June 2025.
The loss of 1.2 million foreign-born people from the labor force between January and July 2025 is a significant warning sign of the negative impact of deportation and strict border policies on the American economy.
Prices for goods and services in affected industries are starting to rise, with the cost of fresh vegetables increasing by 2.0% from April to July 2025, and food away from home rising at an annual rate of 4.1% over the same period.

Implications

Business and Policy Implications

Businesses in industries reliant on immigrant labor should prepare for potential labor shortages and production declines by exploring alternative labor sources or adjusting their business models.
Policymakers should consider the economic implications of deportation policies on industries and regions heavily reliant on immigrant labor.
Companies in the construction, agriculture, and leisure and hospitality sectors should monitor the situation closely and develop contingency plans to mitigate potential losses.
Business leaders and policymakers should be aware of the potential for rising prices and decreased economic growth due to the loss of immigrant labor.

Introduction

The economic implications of large-scale deportations have been a topic of concern for economists and policymakers. Research has shown that past deportations have damaged the American economy, hurting both immigrants and native-born workers. The current deportation efforts, although not yet at the levels seen in the past, are already showing warning signs of economic harm. This report examines the warning signs of economic harms from deportations, focusing on the construction, agriculture, and leisure and hospitality industries.

Background and Context

The United States has a long history of relying on immigrant labor to fill workforce gaps in various industries. The construction, agriculture, and leisure and hospitality sectors are among the most reliant on immigrant labor. Unauthorized immigrants make up a significant portion of the workforce in these industries, with 13% of construction workers, 42% of hired crop farmworkers, and 7% of leisure and hospitality workers being unauthorized immigrants. Previous research has shown that deportations can lead to labor shortages, production declines, and economic losses. The current deportation efforts, coupled with strict border policies, have raised concerns about the potential economic impact.

The construction industry is a significant sector that relies heavily on immigrant labor. With 13% of construction workers being unauthorized immigrants, the industry is vulnerable to labor shortages. States with high concentrations of unauthorized immigrants are already seeing declines in construction employment. For instance, the ten states with the highest concentrations of unauthorized immigrants saw their construction employment drop by 0.1% from June 2024 to June 2025, while all other states saw their construction employment grow by 1.9%. The regional differences in residential housing permits also indicate a potential slowdown in construction activity.

The agricultural sector is another industry that is heavily reliant on immigrant labor. With 42% of hired crop farmworkers being unauthorized immigrants, the sector is facing significant labor shortages. Reports from major growing areas across the country indicate that immigration raids are depleting the agricultural workforce, leaving crops unharvested, and damaging farming enterprises. The data also shows a significant drop in agricultural employment from March to July 2025, with a decrease of 155,000 or -6.5%. This decline is likely to have a ripple effect on food prices, with the cost of fresh vegetables increasing by 2.0% from April to July 2025.

The leisure and hospitality industry is also experiencing staffing difficulties and lost revenue due to deportations. With 7% of the workforce being unauthorized immigrants, the industry is facing significant challenges. States with high concentrations of unauthorized immigrants are experiencing slower employment growth in the industry, with a growth rate of 1.0% compared to 1.3% in other states from June 2024 to June 2025. The industry is also seeing rising prices, with the cost of food away from home increasing at an annual rate of 4.1% from April to July 2025.

The loss of 1.2 million foreign-born people from the labor force between January and July 2025 is a significant warning sign of the negative impact of deportation and strict border policies on the American economy. This decline is likely to have far-reaching consequences, including slowdowns in economic growth, higher unemployment rates, and declines in business formation. As the situation continues to unfold, it is essential for businesses, policymakers, and industry leaders to be aware of the potential economic implications and develop strategies to mitigate the negative effects.

The warning signs are clear, and the data suggests that the economic harm from deportations is already being felt in various industries. As the deportation efforts continue, it is likely that more industries will be affected, and the economic consequences will become more pronounced. It is crucial for stakeholders to take proactive measures to address the potential labor shortages, production declines, and rising prices. By understanding the warning signs and taking strategic actions, businesses and policymakers can work together to mitigate the negative economic impacts and ensure a more stable and prosperous economy for all.

Main Results

The research highlights the warning signs of economic harm resulting from deportations, focusing on the construction, agriculture, and leisure and hospitality industries. These sectors are particularly vulnerable due to their reliance on immigrant labor.

Construction Industry Impacts

The construction industry, which employs a significant number of unauthorized workers (13% nationwide), is experiencing adverse effects due to reduced labor availability. Key findings include:

States with high concentrations of unauthorized immigrants saw a 0.1% decline in construction employment from June 2024 to June 2025, while other states saw a 1.9% growth.
The issuance of residential building permits declined in regions with higher shares of unauthorized workers but increased in the Midwest, which has the lowest share.

Agricultural Sector Consequences

Agriculture is heavily dependent on unauthorized labor, with 42% of hired crop farmworkers being unauthorized immigrants. The data indicates:

A significant drop in agricultural employment from March to July 2025, with a decrease of 155,000 jobs or -6.5%, contrasting with increases in the prior two years.
Reports of labor shortages and crops left unharvested due to immigration raids, potentially leading to production losses and price increases.

Leisure and Hospitality Industry Effects

The leisure and hospitality sector, which includes restaurants, hotels, and domestic workers, is also feeling the impact. Notable findings are:

States with high concentrations of unauthorized immigrants saw slower employment growth (1.0%) in leisure and hospitality compared to other states (1.3%) from June 2024 to June 2025.
Widespread reports of staffing difficulties and lost revenue due to deportations and fear among immigrant customers.

Methodology Insights

The research approach involves analyzing industry-specific data and comparing patterns across different regions and time periods. This methodology is crucial for understanding the economic impacts of deportations, as it:

Allows for the identification of trends and correlations between deportation efforts and economic outcomes in various sectors.
Provides insights into how different industries and regions are affected based on their reliance on immigrant labor.

Analysis and Interpretation

The findings suggest that the economic harm from deportations is already manifesting in key industries. The data and anecdotal reports indicate labor shortages, production declines, and potential price increases. These trends are likely to worsen if deportation efforts continue or escalate.

Strategic Implications

Business leaders and policymakers must consider the following strategic implications:

Labor Shortages: Industries reliant on immigrant labor may need to adapt by exploring alternative labor sources or investing in automation.
Production and Supply Chain Resilience: Companies should assess their supply chains and develop contingency plans to mitigate potential disruptions.
Price Management: Businesses may need to prepare for rising costs and potentially adjust pricing strategies.

Competitive Advantages and Market Opportunities

Companies that proactively address the challenges posed by deportations may gain a competitive advantage. Opportunities include:

Innovation in Labor Practices: Businesses that innovate in labor recruitment and retention may benefit from a more stable workforce.
Diversification: Diversifying supply chains and labor sources can reduce vulnerability to deportation-related disruptions.

Actionable Recommendations

Monitor Industry Trends: Continuously track industry-specific data and reports to anticipate and respond to emerging challenges.
Develop Contingency Plans: Businesses should prepare for potential labor shortages and supply chain disruptions.
Advocate for Policy Change: Companies and industry associations can advocate for immigration policies that balance enforcement with the needs of the economy.

As the situation continues to evolve, it is essential for stakeholders to remain vigilant and adapt their strategies to mitigate the economic impacts of deportations. The next part will delve into the broader economic implications and potential long-term consequences of these trends.

Practical Implications

The findings on the economic harms from deportations have significant implications for businesses, managers, and policymakers. The data and anecdotal evidence presented in the report highlight the vulnerability of industries that rely heavily on immigrant labor.

Real-World Applications

The construction, agriculture, and leisure and hospitality industries are already experiencing labor shortages, production declines, and business disruptions due to the reduced availability of unauthorized immigrant workers. For instance, the construction industry has seen a decline in employment in states with high concentrations of unauthorized immigrants, while agricultural production is being impacted by labor shortages, leading to potential price increases.

Strategic Implications

Businesses and managers in affected industries must develop strategies to mitigate the economic impacts of deportations. This includes:

Diversifying their workforce to reduce reliance on immigrant labor
Investing in labor-saving technologies to improve productivity
Developing contingency plans to address potential labor shortages and supply chain disruptions

Who Should Care

The findings of this report are relevant to a wide range of stakeholders, including:

Business leaders in industries that rely heavily on immigrant labor
Policymakers responsible for shaping immigration policy
Economists and researchers tracking the impact of deportations on the broader economy
Native-born workers who may be affected by the economic consequences of deportations

Actionable Recommendations

To address the economic harms from deportations, businesses and managers can take the following specific actions:

Monitor Industry Trends: Continuously track industry-specific data and reports to anticipate and respond to emerging challenges.
Develop Contingency Plans: Businesses should prepare for potential labor shortages and supply chain disruptions by identifying alternative labor sources, investing in technology, and developing strategies to maintain production levels.
Advocate for Policy Change: Companies and industry associations can advocate for immigration policies that balance enforcement with the needs of the economy, such as providing a pathway to citizenship for unauthorized immigrants or increasing the number of work visas.

Implementation Considerations

When implementing these recommendations, businesses and managers should consider the following factors:

The potential for continued or increased deportations and their impact on the labor market
The need to balance short-term needs with long-term strategic planning
The importance of collaborating with industry associations, policymakers, and other stakeholders to address the broader economic implications of deportations

Conclusion

The report's findings on the economic harms from deportations highlight the need for businesses, managers, and policymakers to take proactive steps to mitigate the impacts on industries that rely heavily on immigrant labor. By monitoring industry trends, developing contingency plans, and advocating for policy change, stakeholders can reduce their vulnerability to deportation-related disruptions.

Summarize the Main Takeaways

The key findings of this report are:

The construction, agriculture, and leisure and hospitality industries are experiencing labor shortages and economic disruptions due to the reduced availability of unauthorized immigrant workers.
The data and anecdotal evidence suggest that the economic harms from deportations are real and significant.
Businesses and managers must develop strategies to mitigate the impacts of deportations, including diversifying their workforce, investing in labor-saving technologies, and developing contingency plans.

Final Thoughts

The economic implications of deportations are far-reaching and have significant consequences for businesses, workers, and the broader economy. As the situation continues to evolve, it is essential for stakeholders to remain vigilant and adapt their strategies to mitigate the economic impacts of deportations. By doing so, they can reduce their vulnerability to deportation-related disruptions and help to minimize the negative consequences for the economy as a whole.

The loss of 1.2 million foreign-born people from the labor force between January and July 2025 is a stark reminder of the potential long-term consequences of deportations. If deportation numbers continue to stay at high levels or further accelerate, we can expect to see slowdowns in economic growth, higher unemployment rates, declines in business formation, and broadly rising prices. It is crucial that policymakers, businesses, and other stakeholders work together to address the root causes of these issues and develop solutions that balance the needs of the economy with the need for effective immigration enforcement.

Ultimately, the goal should be to create a more sustainable and equitable immigration system that benefits both the economy and society as a whole. By understanding the warning signs of economic harm from deportations and taking proactive steps to mitigate their impacts, we can work towards a more prosperous future for all.