Security at our border and stopping the overwhelming influx of illegals into the country were some of the top concerns during the 2024 election. President-elect Donald Trump’s campaign promised to start mass deportation on his first day in office, receiving cheers from some and jeers, along with promises of doom, from others. Will removing aliens from the US hurt the economy? It depends on who you ask.
Will Mass Deportation Damage the Economy?
Marcus Noland, an economist with the Peterson Institute for International Economics (PIIE), claims that if Trump carries out his deportation plans, restaurants will be a “hard-hit sector,” according to Reuters. He and other experts relate the issue to how the economy fared during the pandemic. Many immigrants work in the labor industry, such as farming and restaurants, and advocates for the undocumented say such deportation measures will increase costs across the board. “You saw this during the pandemic when many restaurants had restricted hours, smaller menus and worse service,” Peterson told the outlet.
PIIE estimated that prices for consumers would rise 1.7% in the service sector if Trump deported 1.3 million workers, or, as the outlet reported, would rise 11% if the new administration follows through on his promise to deport all immigrants who are illegally in the country.
“We’re already dealing with a huge labor shortage of food workers,” Jacob Monty, an immigration and employment lawyer who advises chain restaurants, told Reuters. “If you add more enforcement, it’s going to only get harder to find workers to staff restaurants.”
Serving customers is not an easy job, and the frustration of having tips taxed by the government is an insult to some. Trump’s promise to end taxes on tips could be an incentive for more people to apply to these tedious jobs and could also help make up for workers lost due to deportations.
Currently, Trump and his border czar, Tom Homan, have said their first priority is to remove immigrants who have committed crimes – other than breaking into the country illegally – and who pose a threat to US citizens. The broader plan is to remove all illegal aliens from the nation, which may pose some problems, at least for a little while, especially when it comes to farming and labor industries where the majority of migrants work.
In California, for example, one in three workers were immigrants between 2021 and 2023, according to the California Budget & Policy Center, meaning 6.1 million illegal aliens were employed in the Golden State during that time. Recently, Governor Gavin Newsom held a special legislative session to discuss ways to safeguard the state from the incoming administration. The plan is to create a litigation fund of up to $25 million to help fight against any policies that would “harm the state,” according to a release on Dec. 2 from the governor’s office.
“No matter who is in the White House, in California, we will continue to lead with California values,” State Attorney General Rob Bonta said in the statement. “California is the most diverse state in the nation, and immigrants are the backbone of our economy, history, and culture. We will not be caught flat-footed if the President-elect follows through on his threats of mass deportation.”
Opponents of the deportation plans say we need immigrants to fill our job market demands, especially since “our birth rate has dropped down 2% last year from 2022 to 2023,” CNBC explained. The Bureau of Labor Statistics data shows that immigrant workers made up 18.6% of the workforce last year, a new record, the agency said.
Brookings Institution published a study called “Immigration and the macroeconomy in the second Trump administration,” which considers how migration could affect the GDP. “Overall, immigration policy under the Trump administration could reduce 2025 GDP growth by between 0.1 (‘high’ scenario) and 0.4 percentage points (‘low’ scenario), or by $30 to $110 billion,” the study found.
“If we’re talking about what we might see in aggregate for inflation, we have to think about ... another side of the ledger, which is we’re going to have less demand for goods and services because immigrants are going to not be here,” Wendy Edelberg, one of the authors of the study, said. “And moreover, the immigrants who stay, particularly the recent immigrants who stay, my assessment is that they’re going to pull back on their spending, as, you know, they’re trying to figure out what their future holds.”
Concerns about labor shortages and rising costs are valid, but it’s also important to consider potential long-term benefits. For starters, deporting undocumented individuals with criminal records can enhance public safety. While removing migrant workers from sectors like agriculture and hospitality may initially strain businesses, it could create opportunities by increasing job availability for citizens and potentially driving wage growth as employers compete for a smaller labor pool.
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