As President Trump mobilizes efforts to limit immigration, recent research offers a stark warning: Allowing fewer people to enter the country to preserve jobs for American workers may do more economic harm than good.
Harvard Business School Assistant Professor Marco Tabellini studied the results of one of the country’s most stringent experiments with immigration restrictions—the Chinese Exclusion Act of 1882, which barred Chinese laborers from entering the US for 10 years, and effectively shut down immigration through 1965. The goal of the act, which drew bipartisan support, was to preserve jobs and boost wages for US workers, particularly in western states, but Tabellini and coauthors found that it did the opposite: The Chinese Exclusion Act led to reduced manufacturing output, fewer jobs, and lower wages as firms struggled to replace lost Chinese labor. This slowed the growth of manufacturing output, jobs, and wages in western states until at least 1940.
I expect the economy to do worse overall if immigration is restricted—the effects being even more negative or larger if deportation plans are implemented.
Former President Donald Trump won the 2024 presidential election after pledging to make immigration restrictions a top priority, calling for mass deportations and stricter border controls. While the economy is vastly different now than in the 1800s, Tabellini points out that it’s reasonable to assume that many industries today, including agriculture and hospitality, would suffer in similar ways if immigrants were excluded from the workforce, especially at a time when many employees are getting older.
“I expect the economy to do worse overall if immigration is restricted—the effects being even more negative or larger if deportation plans are implemented,” says Tabellini, who coauthored “The Impact of the Chinese Exclusion Act on the Economic Development of the Western US” with Northwestern University Professor Nancy Qian and postdoctoral researchers Joe Long of Northwestern and Carlo Medici of Brown University. “What is more ambiguous is the effect on specific groups of US workers. It’s possible that some workers would be made better off—for instance, we find that local miners experienced stronger employment growth historically. But these would be small groups and I would not be surprised if no specific group among the native-born workers was to gain.
When a labor supply shock takes hold
Tabellini and his team examined data from the US Census, as well as the Census of Manufacturing, between 1850 and 1940 to discover whether white US workers benefitted from the Exclusion Act. They focused on counties where Chinese people made up more than 1 percent of the population in states such as Arizona, California, Idaho, Montana, Nevada, Oregon, Washington, and Wyoming.
At the time, supporters of the Exclusion Act argued that Chinese workers were reducing economic opportunities for white workers. Meanwhile, many business owners opposed the act, saying they couldn’t easily replace Chinese laborers and the economy could suffer as a result. Western states were growing rapidly from the Gold Rush and the construction of the transcontinental railroad. Chinese laborers made up about 12 percent of the male working-age population and 21 percent of all immigrants, according to the paper.
Researchers compared the productivity and employment in counties with more than 4 percent of Chinese laborers before and after the law’s passage versus those with smaller populations. The team argues that barring Chinese workers from the US triggered a severe labor shortage that disrupted multiple industries, such as manufacturing, mining, and transportation.
In addition to closing the border to new Chinese workers, the Exclusion Act also prohibited workers already in the country from obtaining citizenship and barred them from re-entering the US if they returned to China.
As a result, according to the findings:
The availability of skilled and unskilled Chinese workers dropped by 64 percent.
Manufacturing output declined by 62 percent.
The number of active manufacturing establishments fell anywhere from 54 percent to 69 percent, depending on the statistical methods used.
To confirm the findings, the researchers also examined the data from the perspective of US workers. If the policies were considered successful, Tabellini writes, the number of white laborers would have grown, particularly in areas with high Chinese populations. Again, though, the opposite occurred: The number of skilled white workers declined by 32 percent, as did the number of white managers.
Ultimately, lawmakers’ hopes for sparking prosperity “didn’t go as planned,” Tabellini said.
Long-term risks of restrictions
Tabellini acknowledges that the paper explores a historical episode from a century and a half ago, but he says today’s policymakers should heed the lessons. Shortly after taking office, Trump signed executive orders to close the US southern border to migrants, among other steps aimed to sharply reduce immigration.
Significant US industries in today’s economy, such as hospitality and agriculture, depend heavily on foreign labor for their success. Tight restrictions, Tabellini says, would almost certainly create labor force disruptions that would threaten some companies’ survival.
Understanding the economic effects of immigration is very complicated and thorny ...
That said, Tabellini stresses that he and his coauthors are not arguing for open-border immigration. Their paper, he says, is simply an assessment of the 1882 Chinese Exclusion Act. “Understanding the economic effects of immigration is very complicated and thorny because of all the variables involved,’’ Tabellini says.
Demographics are one of those variables. Sudden new immigration restrictions could considerably damage the country’s ability to adjust to an aging labor force that is expected to shrink dramatically in the coming years, Tabellini says. Immigrants can help maintain the workforce by replacing aging workers.
Many immigrants view the US as a favorable place to pursue work now, but potentially hostile-sounding restrictions might threaten that perception. “The problem of the future with immigration will be encouraging immigrants to come, not forcing them to leave,” he says.
Image by HBSWK with asset from F Armstrong Photo for Adobe Stock.