Misallocated migrants: Immigration and firm productivity in Australia

by Dan Andrews, Erin Clarke, Lachlan Vass and Aaron Wong

The e61 Institute has published new research on the links between migration and firm productivity in Australia. Noting that Australia’s migration program has many different purposes and goals, this analysis sheds new light on a little studied economic aspect of our migration program – productivity.

At the aggregate level, the research finds:

  • Migrant workers in Australia are more likely to work in lower productivity industries than non-migrant workers.
  • Within industries, migrant workers are more likely to work at lower productivity firms.
  • These patterns have become more prevalent over the course of the 2020s, and do not appear to be offset by an improvement in the link between migrant employment and productivity within firms.

However, there is significant heterogeneity across visa types:

  • Migrant workers on more ‘targeted’ visas (Permanent Skilled and Temporary Skilled) are more likely to work in higher productivity firms, including compared to non-migrant workers.
  • Workers on ‘untargeted’ visas (Student and Working Holiday Maker) are more likely to work in lower productivity firms.
  • Within firms there is a positive link between targeted migrant workers and firm productivity, and a negative link for untargeted migrant workers.

These findings can help inform the current debate on migration policy reform, including through the Department of Home Affairs’ Migration Review.