US employers face labor-shortage headaches amid declining fertility rate, immigration crackdown

The Great Resignation may feel like a distant nightmare for many employers, who, in 2025, have regained leverage on the labor market. But as the country’s changing population increasingly creates labor shortages, that post-pandemic period may feel like the good old days.

Impending labor shortages stemming from demographic changes, like declining birth rates, have been on employers’ radar. As 2025 US immigration policy shifts the makeup of the market, a challenge that might’ve felt like a future problem for HR pros is becoming a more imminent issue.

“The demographic challenges have been plaguing talent leaders for most of the time that I’ve been in this work, which has been my entire working lifetime,” Alison Lands, VP of the employer mobilization practice at Jobs For the Future, told HR Brew. “The labor market has only continued to get tighter, and the pain points have only continued to get more painful. So there’s never a better time to think about it than right now. Kicking the can down the road will make things more difficult.”

The times they are a-changin’. The US birth rate has been declining since 2007, when an average 2.12 babies were born to women of a childbearing age. In 2023, the fertility rate hit a new low, falling to 1.61 births, according to World Bank data. Projections for 2025 from the Congressional Budget Office (CBO) suggest the US fertility rate will remain around 1.6 births as women choose to continue delaying childbearing due to factors including higher costs of living, as well as greater access to education and career opportunities.

As a result, “we’re just simply not producing enough workers to replace the number of workers that are retiring. And that’s been a long-term trend. It hasn’t shown any signs of reversing,” said Lands. “And for a very long time, we’ve been able to sort of soften the effects of that, or mitigate some of them, because we’ve had a pretty steady or healthy amount of external in-migration.” According to the Bureau of Labor Statistics, foreign-born workers made up 19.2% of the US workforce in 2024, the highest share since the agency began tracking in 1996.

This changed when President Donald Trump—who campaigned on promises of immigration restrictions and deportations—took office in January 2025. It’s unclear exactly how many immigrants have since been deported (the Department of Homeland Security claims to have deported 400,000 individuals, while 1.6 million “self-deported,” though some experts have expressed skepticism over those estimates). After nine months of his second administration, the immigrant population has shrunk for the first time since the 1960s, as border crossings reached historic lows, the administration imposed restrictions like its $100,000 H-1B visa application fee, and foreign workers’ interest in US jobs waned.

This will likely impact the US economy in the coming years, significantly. A brief published by the Paris School of Economics assessed the potential economic impacts of the Trump administration’s immigration policies, based on high and low deportation scenarios. The low scenario assumed that 1.3 million migrants would be deported by 2028, reducing employment by 1.1%, and the GDP by 1.2%. The high scenario assumed as many as 8.3 million migrants could be deported, reducing employment by 6.5% and the GDP by 7.4%. Either scenario could exacerbate labor shortages.

“Some of that external in-migration is reducing…it’s contracting from what it has been for the past couple of decades, and coupled with our declining replacement rate, it’s putting additional pressure on our labor market,” Lands said. “So structural labor shortages are now even being, I think, more acutely felt.”

Can AI help? Many employers are already exploring solutions to labor shortages. Some business leaders and consultants believe, for example, that AI can help, while others feel its value may be overstated. “AI may be able to ameliorate some of it, but it’s not going to correct all of it,” Lands said.

The technology is also expensive to produce and to buy—more than one-fifth of senior leaders surveyed by EY said their organization has invested $10 million or more in AI—and it doesn’t always achieve the intended results: 95% of generative AI expenditures have netted zero returns, according to MIT research.

“This stuff is still really expensive,” said Svenja Gudell, Indeed’s chief economist. “Particularly for smaller firms, where money could still be a point of an obstacle when it comes to full adoption of some of these technologies.”

Additionally, a significant amount of electricity and water is required to power AI, creating environmental concerns. And it may not even benefit many industries experiencing acute labor shortages. Consider healthcare, which has seen steady job growth amid the cooling labor market. While healthcare workers may use AI to assist with tasks such as note taking or diagnosing, their jobs are highly unlikely to be fully automated.

“We’re going to see some limitations that AI has on these sectors where either you need more physical presence, or it’s simply policy driven [where] it needs to really be perfect before we can do it,” said Gudell.

Building, not buying. As labor shortages increase, employers could be challenged to find the talent they need. Developing their existing workforce will be crucial.

“Particularly with the onset of AI, on-the-job training and re-skilling will become even more important, especially if you’re in a world where you don’t have massive amounts of labor, just lying on the shelf free to hire,” said Gudell.

As attrition rates fall amid a cooling labor market, employers have a ripe opportunity to upskill and reskill their workforces. They just have to take the initiative, and so far, research suggests many aren’t doing so.

“I think there’s an appetite for workers who want to learn these skills. What we’re not seeing are employers who are making sufficiently large investments in upskilling and reskilling to prepare their workforce to have those human AI-collaboration and AI literacy skills that they’re going to need in order to get ahead of the AI curve,” said Lands. “If we wait until the technology is already here in order to train people on it, then we’re going to have some rough adaptation moments.”

Rethinking global talent. Some employers are diversifying how they attract talent, including finding ways to bring foreign-born workers to the US, said Gudell. The share of US job postings advertising visa support was 257% higher in May 2025 than in February 2020, according to Indeed data. (Though President Trump’s $100,000 fee for H-1B visas could curtail that interest.)

“They’re certainly flexing their creative muscle in order to attract other talent,” said Gudell.

Some companies may consider expanding operations internationally to attract talent. In fact, a 2024 ADP survey found that one-third of midsize and large US companies planned to start hiring internationally in 2025. But this option may only be feasible for large employers, or those with the infrastructure to hire internationally, according to Lands.

“At the moment, I’m thinking there’s probably a disincentive to doing that unless you’re already a large multinational that has the apparatus in place,” she said.

Embracing multi-generational. Many older Americans are reentering the workforce after retirement, or delaying retirement altogether. Employers can use this to their advantage, as long as they cater to the preferences of the generations in their workforce.

“Now we have as many as five generations all simultaneously, working alongside one another, and culturally, they’re pretty different from one another in their mores and attitudes towards work, how they work, and their ways of working,” said Lands. “Because of this, that’s introducing another demographic shift that companies have to adapt to in order to attract talent, in order to retain talent, in order to support teaming environments and get the most out of their people.”

Benefits—particularly financial, mental, and physical wellness benefits, Lands said—can help foster a multi-generational workforce.

A new task for CHROs. As CHROs look to maintain their influence among their C-suite peers, finding ways to address labor shortages will be critical.

“I do think the demographic challenges aren’t going away. It’s kind of like climate change or any other big structural system. It’s in the process of flux. It has to calibrate itself,” said Lands. “Talent is one of the most important investments that a business will make, and 70% of business costs are related to labor, people and talent. So any progress you can make in this part of the business is going to yield a positive impact to the bottom line.”

This is one of the stories of our Quarter Century Project, which highlights the various ways industry has changed over the last 25 years. Check back each month for new pieces in this series and explore our timeline featuring the ongoing series.

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