Mass deportations, if they were to go ahead, would drive higher construction costs, lead to further skills shortages, and potentially result in output losses at construction companies, Oxford Economics predicted in a new research briefing.

The US has around 11 million undocumented immigrants living in the country, according to figures from the Department of Homeland Security and Pew Research. Ahead of being elected US President, Donald Trump promised mass deportations.

Since his inauguration, arrests as part of immigration enforcement have risen sharply.

Oxford Economics鈥� senior economist Nico Palesch and economist Sebastien Tillett said that a successful campaign of mass deportations is not part of their baseline forecast.

If the pace of deportations were to pick up, however, then there could be a significant impact on construction, Oxford Economics said.

That is because the construction industry is more reliant on undocumented immigrant labour than any other sector in the US.

Growth in construction wages already outpace general economy, according to Oxford Economics

The economists estimated that one in seven employees (14.2%) is undocumented, which is markedly higher than agriculture (10.2%), the next-most-reliant sector on undocumented labour.

Palesch and Tillett said, 鈥淗igher deportation rates would aggravate job shortages and put upward pressure on wages and costs.鈥�

There were 23,000 arrests of undocumented migrants in February, according to federal data, while there were 18,000 deportations. Arrests hit a peak of 872 people per day shortly after Trump took office, although that fell to just under 600 people per day by mid-February, according to the New York Times.

Deportations do not so far appear to have kept pace with arrests. US Department of Homeland Security data showed that 37,660 people were deported in Trump鈥檚 first month in office, which was less than the 57,000 monthly average removals and returns under his predecessor, President Joe Biden.

A 鈥榦ne-two punch鈥�

If all undocumented construction workers estimated to be working in the sector were to be removed, it would put the sector under pressure in terms of both price increases and output losses, Oxford Economics said.

Construction companies would come under pressure to increase direct wages, while recruitment and retention costs for firms could also rise. Hourly earnings for US construction workers already increased by 4.4% year on year in Q4 2024, which was at least one percentage point higher than the average quarterly increase seen during the Covid-19 pandemic.

Mass deportations will erode growth in construction, Oxford Economics鈥� research suggests

Those cost increases would likely feed through to the cost of projects themselves. The National Association of Homebuilders estimates that labour costs account for nearly a quarter of the final price of a new home.

鈥淏eyond the direct impact on wages, a reduced workforce will extend project timelines and increase backlogs. Delays caused by disruption to the labour supply will lower overall industry output over both the short and long term as trying to replace lost labour will take time and projects are likely to become unprofitable if labour costs rise too quickly,鈥� Palesch and Tillett said.

They added that the time taken to replace the potential loss of so many skilled workers may not be possible in the short term and would require higher spending on education and training to replace them.

To quantify the impact of mass deportations, Oxford Economics calculated the hit to gross value added (GVA) by the construction sector.

Assuming no productivity growth in the sector, and based on 2023 data, they estimated that deporting 50% of undocumented construction workers could cut construction growth in half through to 2028. That would equate to $55 billion worth of lost construction output, should mass deportations go ahead.

Another headache for construction?

Mass deportations could prove to be another headache for US construction companies if they were to go ahead, given the price inflation that trade tariff hikes could also bring to the sector.

The picture on exactly where US tariff increases finally land and how they affect prices is still unclear, following US President Donald Trump鈥檚 decision to suspend a raft of proposed increases for 90 days. Additional tariffs on copper and lumber are still under review.

Nonetheless, the Associated General Contractors of America (AGC) warned last week (11 April) that non-residential construction materials prices are already rising, even before the impact of tariffs is felt.

Prices rose on average 0.4% in March, with metals and lumber the major contributors to that increase, it found. That followed increases of 0.6% in February and 0.8% in January.

鈥淟umber and metals prices shot up in March, while contractors鈥� inboxes are bulging with 鈥楧ear Valued Customer鈥� letters announcing further increases for many products,鈥� said Ken Simonson, the association鈥檚 chief economist. 鈥淩apid-fire changes in tariffs threaten to drive prices higher for many essential construction goods.鈥�

The index for steel mill products jumped by 7.1% in March. Aluminium mill shapes jumped by 5.1% for the month, and the index for lumber and plywood rose 2.7%.

Since the prices used to calculate the indexes were collected on 11 March, new tariffs of 25% on steel and aluminium imports, 25% on some goods from Mexico and Canada, 145% on imports from China, and 10% on most other countries have been introduced.