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Study finds immigrant diversity increases wages

By CHARLOTTE HSU

Published January 18, 2017

“There’s a huge amount of attention to and fears about what immigrants do to the local economy.”
Abigail Cooke, assistant professor
Department of Geography

In debates over immigration, economic anxieties loom large. One of the most common concerns is that an influx of workers born abroad will depress wages for native-born Americans.

But the opposite may be true, according to researchers Abigail Cooke, a UB assistant professor of geography, and Thomas Kemeny, a UB research assistant professor and a lecturer at the University of Southampton in the United Kingdom.

Together, Cooke and Kemeny are sifting through 18 years of employment data from the U.S. Census Bureau to understand how wages respond to changes in the mix of immigrants in a region or workplace.

The two outline some of their recent findings in a September research brief written for the Partnership for a New American Economy (PNAE), a coalition of U.S. mayors and business leaders founded by Michael Bloomberg and Rupert Murdoch to advocate for immigration reforms.

Cooke and Kemeny’s report provides evidence that immigrant diversity increases wages, generating widespread benefits to both high- and low-paid workers.

“There’s a huge amount of attention to and fears about what immigrants do to the local economy,” says Cooke, who joined UB’s geography department in 2014 after earning her PhD from UCLA. “As un-self-reflective as that is, that has been a near constant concern throughout the history of this country.”

Rival views on diversity

There are conflicting theories on whether immigrant diversity aids or hinders productivity, Cooke says.

“Some people think that increasing the diversity of perspectives in a group makes it harder for people to cooperate, harder to work together,” she explains. “On the other hand, there are those who say immigrants bring diverse perspectives on how to solve problems, and that this is beneficial for getting things done.

“Our results point to a net positive impact of diversity on productivity. And these benefits are evenly spread — people throughout the labor market, from the lowest- to highest-paid, enjoy them.”

Cause and effect

To study how immigrant diversity influenced wages, Cooke and Kemeny assigned 160 U.S. metropolitan regions with a “diversity score” based on the likelihood that two people chosen at random from a metro area were born in different countries. The researchers then looked at how annual changes in metropolitan diversity scores related to changes in the wages of more than 30 million workers between 1991 and 2008.

The pair also employed a similar diversity-score measure for individual workplaces to study whether impacts from diversity are felt at both the workplace and metro level.

Some key findings:

  • When immigrant diversity rose among the highest-paid workers — the top 25 percent in every metropolitan area — wages for all workers rose significantly and substantially.
  • When immigrant diversity rose among the bottom 50 percent of earners, wages rose a small amount for the bottom 25 percent of all earners, while wages for other workers were unaffected.
  • When immigrant diversity rose among the lowest-paid workers — the lowest 25 percent — there was no impact on wages for workers of any income level.
  • When immigrant diversity rose across all wage levels, wages rose for all workers.
  • Rising diversity within workplaces has a separate positive effect on wages, with a smaller but more consistent magnitude than the city-level effect.
  • For no group of workers did immigrant diversity have a negative effect on wages.

The researchers used a variety of statistical techniques to ensure the changes they observed in wages were rooted in diversity and not in a wide range of other potential factors, including traits of individuals (such as differing abilities), workplaces (such as varying levels of managerial effectiveness) and cities themselves (such as different levels of education in the workforce).

To further explore the link between diversity and productivity, Cooke and Kemeny have begun studying how diversity influences wages of workers in different fields, such as those that involve high and low levels of innovation, creativity and science, technology, engineering and mathematics.

They also are exploring how cities whose residents are more welcoming to immigrants may receive larger rewards from the immigrant diversity in their midst.