You Can't Deport Supply and Demand: How ICE Raids Contribute to Labor Shortages

For years, advocates of mass deportation insisted that aggressive immigration enforcement would strengthen the economy and help natives born in the U.S. find a job. The theory is that you remove enough workers, somehow businesses, customers, and local economies adjust without any pain. Beyond this political rhetoric begs an important empirical question: what actually happens to labor markets when Immigrant and Custom Enforcement (ICE) enforcement increases? Is ICE actually making the labor market better? A recent paper from the National Economic Bureau of Research (NBER) using data from areas affected by immigration raids and related enforcement policies. 

Instead of relying on simple "before-and-after" comparisons, the author of this NBER paper use regional differences in ICE enforcement to examine how labor market outcomes diverged over time. One of the big conclusions is that greater ICE enforcement led to less employment for undocumented workers. But the effects did not stop there. The study found little evidence that this enforcement helped native workers. Meanwhile, businesses with immigrant-heavy sectors experienced labor shortages and operational disruption. The fact that this study compared changes across regions, as opposed to simple national trends, provides a stronger analysis than a basic correlation analysis.  

Broader economic literature on immigration explains why this NBER study's findings are unsurprising. Despite the political rhetoric of immigrants taking jobs from native-born workers, economists have found very little evidence that immigration substantially reduces native employment overall. If that claim were true, we would have seen ICE enforcement generate clear increases in employment opportunities for native workers. Yet no such clear increase emerged in the study. As a matter of fact, the study points toward labor-market disruption and spillover effects. 

That is because the economy is not a fixed pie. Economic literature already indicates that immigrants are often complements rather than simple substitutes for native labor. In industries such as housing construction, hospitality, agriculture, and food processing, different categories of workers frequently depend on one another to maintain production. Removing that part of the workforce can and does reduce productivity and labor demand elsewhere in the economy. 

There is also evidence that immigrant workers can increase wages for native workers. That is because immigrants are not only workers competing for jobs. They are also consumers, renters, entrepreneurs, and customers. When policymakers treat the labor market like a fixed pie, they ignore this high level of interconnectedness. 

It is that level of interdependence that makes these findings unexpected. Large-scale immigration enforcement acts as a supply shock. That shock propagates throughout supply chains and affects firms, consumers, and workers beyond the targeted population of the mass deportation. The fact that the pro-mass deportation argument is based in a simplistic view of the economy is part of why I was against mass deportation in 2024. 

None of this determines the question of how much immigration enforcement is appropriate. What it does show is that mass deportation is not costless or uniformly beneficial. While "deport them and it will work out" is a snazzy political slogan, it still does not repeal arithmetic or basic laws of economics.