Increased Diversity in Metropolitan Areas Results in Higher Wages for All Workers, Study Finds

New York, NY—Immigrants hail from a wider range of countries now than at any other point in U.S. history, and today, New American Economy released new research showing that a more diverse America benefits both high- and low-wage workers.

The report—an analysis of data from the U.S. Census Bureau—tracks individual workers in 160 U.S. metropolitan areas between 1991 and 2008, and measures how their wages change as their cities or workplaces become more diverse. Diversity, as defined by the authors, means that it is more likely that two people in a city or workplace, chosen at random, are from different countries. Metropolitan areas can become more diverse in multiple ways—by shrinking their native-born population, growing their foreign-born population, or absorbing immigrants from a wider variety of countries. The report shows that when diversity increases through immigration, meaningful wage benefits accrue to all workers—from the highest earners down to the lowest.

“This report should encourage the many U.S. cities and firms creating policies to welcome and integrate immigrants,” said John Feinblatt, Chairman of New American Economy. “With Congress gridlocked, local leaders are taking the initiative – and increasingly bringing the economic benefits of diversity to their communities.”

The report, The Riches of the Melting Pot: How Diversity in Metropolitan Areas Helps Grow the Wages of Low- and High-wage Workers, finds:

  • Both low- and high-wage workers gain when U.S. cities become more diverse. When a city experiences a diversity boost, the average person living in the metropolitan area sees their wages rise by about 6 percent. These wage increases are broadly shared: Workers in the top 25 percent of all earners see wage increases of 6.6 percent, while workers in the bottom 25 percent of all earners experience a 7.1 percent wage boost on average.
  • Increases in diversity among the highest earners in a city result in dramatic wage gains for all income groups. A diversity boost concentrated among the top 25 percent of earners in a metropolitan area results in an 18 percent wage jump for other high-wage earners in the area—or an average increase in wages equivalent to $13,000 per year. Local workers in the bottom 25 percent of earners, meanwhile, see their annual wages rise by 16.2 percent on average, or by about $4,100.
  • Low-wage workers benefit from rising diversity in the bottom half of the labor market. A diversity boost among the bottom 50 percent of wage earners in a metropolitan area raises the average local wages of workers in the city overall by 1.6 percent. That effect, however, is driven by dynamics at the lower end of the labor market: While other workers see a statistically insignificant effect, the lowest 25 percent of earners see their wages rise by 2.1 percent on average.
  • Increasing diversity among the lowest earners has either a positive or neutral effect on others. When the lowest 25 percent of earners in a given workplace experiences a diversity boost, the wages of other workers at that company—across all income tiers—rise. At the metro level, such a diversity boost appears to have no significant effect—either positive or negative—on the income of other local workers.

Read The Atlantic’s CityLab coverage of the report by staff writer Tanvi Misra,“Diverse Metros Mean Higher Wages For All.”

About Us

New American Economy is a bipartisan research and advocacy organization fighting for smart federal, state, and local immigration policies that help grow our economy and create jobs for all Americans. More…