Mr Shorten's centre-left Australian Labor Party (ALP) vowed to "employ Australians first" in the advert released on Sunday.
However, the video was widely criticised for the people it chose to feature, a majority of whom were white.
Mr Shorten denied racism, but conceded the video lacked diversity.
Another Labor frontbencher, Anthony Albanese, described the advert as a "shocker" and said it should "never have been produced".
Immediate backlash