The Impact of Restricting Labor Migration on Service Sectors: Lessons from Europe and the United States

By Mika Horelli, BRUSSELS   

I have lived in the United States as well as in several European countries and have closely followed migration-related policies across the globe. One overarching observation is clear: despite the undeniable economic benefits of labor migration, it has recently become a target of right-wing populist rhetoric on both sides of the Atlantic. Populist nationalists often emphasize sovereignty, security, and the preference for "domestic labor," yet these policies increasingly harm their own economies. This has been particularly damaging to service sectors that heavily depend on foreign labor.  

The United Kingdom provides a cautionary example of the consequences of restricting labor migration. Following Brexit, EU citizens lost their right to work freely in the UK. This has led to a persistent and acute labor shortage, especially in the hospitality sector, where workers from EU countries previously made up a significant portion of the workforce.  

The British hospitality association, UK Hospitality, reported in 2023 that the number of open job positions in the sector had increased by 48% since 2020. A London-based restaurant that once employed 50 staff members now often operates with just 35, leading to longer wait times and a decline in customer experience. Thousands of restaurants have closed because they cannot find sufficient staff. This labor shortage has directly impacted the profitability of businesses and the broader economy.  

In the United States, labor migration restrictions were tightened during the first Trump administration, and many of these measures remain in place. As Trump's second term begins, the MAGA movement is pushing for even stricter rules, regardless of the damage they cause. The care sector is particularly vulnerable, as it heavily relies on foreign workers. The U.S. care industry has faced a deepening crisis, with restrictions preventing foreign caregivers and assistants from entering the country.  

For example, in 2022, approximately 15% of care jobs in the United States remained unfilled, and the quality of elderly care has declined in many areas. California provides a striking example, where closures of care homes have become increasingly common due to the inability to recruit adequate staff. Care home administrators report that without immigrant workers, the sector simply cannot meet demand. This shortage has also led to rising wages, which in turn increases care costs for consumers.  

In EU countries such as Germany and Austria, care and construction sectors have encountered similar challenges. While these countries maintain relatively open migration policies, pressure from right-wing populist parties has led to tightening regulations on labor migration. In Germany, where foreign workers make up 25% of the care workforce, recruitment challenges have worsened. A 2024 study found that staff shortages in care homes had risen by 15% compared to 2020.  

In Austria, hotels and restaurants have been forced to scale back operations, particularly in ski resorts, where seasonal labor has become harder to secure. Many business owners report that customers face long service delays or even canceled reservations, affecting the entire tourism industry.   

A recent report from the European Commission (2024) estimates that by 2030, the EU will require 25 million new jobs, particularly in care, construction, and service sectors. Continuing restrictive migration policies would leave many of these positions unfilled, jeopardizing economic growth and the quality of services.  

In the United States, the Bureau of Labor Statistics projects that care sector jobs will grow by 34% by 2030. However, without foreign workers, the industry cannot meet this demand, making care services increasingly inaccessible, especially for low-income families.  

In Finland, foreign professionals are urgently needed in the care sector, and the technology industry. In elderly care, foreign workers are essential to meet the growing needs of an aging population. In the technology sector, software developers and engineers are highly sought after, as the industry's growth outpaces the capacity of domestic education to supply skilled labor.  

There are stark differences in economic outcomes between countries that restrict labor migration and those that actively recruit foreign professionals. For instance, Canada and Australia are renowned for their strategic immigration programs that attract highly skilled workers worldwide. These countries have experienced more stable economic growth and adaptable labor markets, enabling them to address challenges posed by aging populations.  

In contrast, countries like the UK and the United States, where labor migration has been significantly curtailed, face growth bottlenecks caused by labor shortages. For example, the UK's construction sector has suffered post-Brexit due to declining migrant labor, delaying infrastructure projects and increasing costs. Similarly, U.S. states like Texas have reported declines in agricultural and service sector output due to insufficient migrant labor.  

In Europe, Germany's efforts to facilitate migration have enabled it to maintain steady economic growth and competitiveness, particularly in the technology sector. This highlights the importance of viewing migration as an integral part of long-term economic strategy.  

Practical examples and statistics demonstrate that restricting labor migration is shortsighted and economically damaging. The challenges faced by service sectors serve as a warning of why migration is an essential component of a functioning and sustainable society. Instead of imposing barriers, policies should promote responsible and managed labor migration to ensure the prosperity of service industries and society as a whole.