Immigration Enforcement: Native Employment Impacts and the Complementarity Trap

Immigration Enforcement: Native Employment Impacts and the Complementarity Trap

A central argument for immigration enforcement and lower immigration levels is that reducing the supply of foreign-born workers will draw inactive native-born workers back into the labor force and raise wages. However, recent empirical work in 2026 highlights a complex economic trade-off: while restricting low-skilled immigrant labor can boost wages for a narrow set of native workers in highly exposed, immigrant-heavy occupations, it can also lead to broader real wage declines for the vast majority of native workers due to price increases, reduced economic scale, and the loss of labor complementarities.¹

The Macroeconomic Impact of Mass Enforcement and Deportations

A major study by Javier Cravino, Andrei A. Levchenko, Francesc Ortega, and Nitya Pandalai-Nayar (NBER Working Paper 34790, February 2026) quantifies the economic consequences of large-scale deportations. The authors develop a multi-region, multi-sector quantitative model of the U.S. economy, using a novel algorithm to impute the legal status of foreign-born workers in the American Community Survey (ACS). They find that fully unauthorized immigrants make up about 3% of the U.S. workforce, but are heavily concentrated in specific sectors—comprising over one-third of the workforce in farming, and significant shares in construction and food services.

Simulating the removal of 50% of unauthorized workers nationwide (about 1.5% of the total workforce), the authors find that the conventional expectation of broad wage gains for native-born workers is challenged by general equilibrium effects:

"We find average real wages for natives fall by 0.3% nationally and fall in every state. The declines are steepest in California, Washington, New Jersey, and Texas (−0.4 to −0.5%). But, as predicted by the theory, not all natives lose: those in immigrant-heavy jobs, like farming, see wage increases of as much as 3–7%."

The decline in average native real wages is driven by rising cost-of-living effects, particularly in states with high initial shares of unauthorized workers. The removal of unauthorized workers raises the relative prices of immigrant-intensive sectors. For instance, farm goods become 1.6% more expensive relative to the overall price index. Because lower-income households spend a larger share of their income on staples like food, the cost-of-living shock is slightly regressive, though the gap between the bottom and top 5% of earners is a modest 0.02 percentage points.

Conversely, the primary beneficiaries of mass enforcement are authorized immigrants (who see a 3% real wage increase) and the unauthorized workers who remain in the country, whose wages rise by an average of 12% due to their relative scarcity and low occupational substitutability with native workers.

The Restrictionist Perspective and Early Labor Force Indicators

In contrast, a study by Steven A. Camarota and Jason Richwine published in American Affairs (May 2026) argues that the post-2024 slowdown in illegal immigration and subsequent enforcement actions are beginning to show positive signs of drawing native-born workers back into the labor force. Analyzing Current Population Survey (CPS) data, they report that between January 2025 and February 2026, the number of employed native-born workers rose by 412,000, while the number of employed immigrants fell by 606,000.

Camarota and Richwine acknowledge that the overall unemployment rate for natives remained slightly elevated at 4.7% in February 2026 compared to 4.3% in January 2025, and that overall job growth slowed. However, they argue that drawing marginalized native-born men back into the labor force requires a sustained policy of low immigration:

"Based on our view of the data, the theorized benefits of reduced immigration, such as drawing more low-skill natives back into the labor force, may be beginning to emerge. But in order to fully realize these gains, a sustained policy of low immigration will be necessary over the long term."

They also note that while real wages in immigrant-heavy occupations like construction, cleaning, and groundskeeping were flat in Q4 2025 compared to 2019, sectors experiencing sudden labor drops—such as agriculture and food services—saw real annual wage gains of about 3%.

Sectoral and Market Context

These labor dynamics are highly relevant to key sectors of the U.S. economy, such as construction and agriculture, which are currently operating under distinct financial conditions:

• Agriculture Sector: The sector faces a complex landscape with diverging financial performance. While Corteva (CTVA) reports a 23.7% profit margin, Archer-Daniels-Midland (ADM) and Bunge (BG) run on much thinner margins of 1.27% and 1.24% respectively, making them highly sensitive to labor cost shocks.
• Construction Sector: The sector remains robust, with Caterpillar (CAT) leading with a market capitalization of $409.34 billion and 22.2% YoY revenue growth. Profit margins across construction materials and equipment firms remain healthy, ranging from 12.7% at Martin Marietta (MLM) to 18.2% at Caterpillar.
• Macro Backdrop: As of mid-2026, the U.S. labor market remains relatively tight, with an unemployment rate of 4.2% as of June 1, 2026, and the 10-year Treasury yield standing at 4.71% as of July 23, 2026.

These figures illustrate that while some capital-intensive sectors like construction may have the financial cushion to absorb labor supply adjustments, low-margin sectors like agriculture are highly vulnerable to the cost-of-living and price shocks identified in recent general equilibrium models.