Persistent labor shortages could turn the U.S. economy into another Japan, counting lost decades of economic growth.

Immigration could ease the situation.

The U.S. has a severe labor problem. It doesn't have enough workers to keep up with the needs of its economy, as evidenced by a string of jobs reports, including one last week. The unemployment rate, a measure of the labor market tightness, remains at record low levels, though economic growth has slowed down.

Low unemployment is usually a healthy sign for the U.S. economy. That's when low unemployment is caused by strong economic growth providing plenty of opportunities for the nation's labor force. Moreover, lower unemployment means fewer people are without jobs and the paycheck that goes with it. And that's a burden for federal and state governments that assist the unemployed.

But there's an exception to this rule. That's when low unemployment is caused by too little labor supply, as has been the economy in recent years. It's due to the aging of the population, followed by a decline in labor force participation. As a result, it dries up the pool of workers available to fill job vacancies.

And the situation will get worse over the next decade, according to Nan Wu, Research Director at the American Immigration Council.

"Our recent findings reveal that not only are the most in-demand jobs now expected to continue to outpace the supply of available labor in the near term," Wu told International Business Times in an email. "But by 2030, millions of additional workers will be needed to fill new jobs and those vacated by retiring workers."

Economists know too well where labor shortages lead in the short run: wage inflation, which complicates monetary policy and perpetuates the nation's inflation problem.

And they point to where this situation leads in the long run: A shrink in the economy's growth potential, as has already happened to Japan. The once vibrant economy has suffered three decades-long stagnation without an end.

What's the solution to the problem? Higher birth rates can mitigate the aging of the U.S. population, but that cannot happen overnight. Automation and A.I. can be of help, but they have their limits too.

Still, there's the opening up to immigration, something Japan has refused to do for years, remaining a closed economy.

But the U.S. isn't Japan. Instead, it's a country open to immigrants who have helped filled labor shortages and maintain robust economic growth. But that has changed recently, with legal immigration plunging by nearly 40%, adding to labor market shortages.

According to Marina Shepelsky, CEO of Shepelsky Law Group, immigration can do its magic again, help ease the tightness of the labor market and keep the economy growing.

"If we legalize the over 11 million undocumented immigrants and they take their rightful places in our labor market, this will be very helpful," she told IBT in an email. "Hardworking, educated, and experienced immigrants from abroad to fill gaps in our labor market. Foreign-born workers currently make up 17% of the U.S. labor force."

Shepelsky argues that immigrants are willing to take the agricultural and labor-intensive jobs that U.S.-born workers often do not. Moreover, they are also willing to take 88 cents on a dollar for American jobs, statistics show.

"Immigration leads to the creation of additional jobs but also raises competition for American-born workers, which can be beneficial by increasing productivity," she added.

Wu provides further arguments in favor of the need for immigrant workers.

"While young people entering the workforce will fill many jobs, the gap between the demand and a diminishing supply of U.S.-born workers suggests that more workers will need to come from abroad to make up for the shortfall—or these positions will go unfilled," he said. "While the COVID-19 pandemic brought massive disruptions to the U.S. labor market, our research found that immigrants have been a stabilizing force, filling openings in essential occupations and helping to meet the demand for the fastest-growing jobs over the next decade."

Boris Dorfman, founder of LBC Capital Income Fund, is skeptical about immigration, as he sees arguments for and against it.

"While some believe immigration is essential to solving America's labor market problems, others argue that it only exacerbates them," Dorfman told IBT.

"There is no easy answer to this question, as the effects of immigration are complex and far-reaching. However, immigration can help and hurt the U.S. labor market, depending on the circumstances. Given the complex nature of the issue, it is unlikely that immigration will provide a simple solution to America's labor market problems. Rather, a more comprehensive approach is needed that considers the many factors involved."

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