Productivity Commission researchers are applying the same methods used to estimate gender and ethnic pay gaps to explore how the relative productivity and wages of migrants differ from New Zealand-born workers and across different groups of migrants.

When taken as a uniform group, migrant workers appear to produce slightly less than the average NZ-born worker but capture a larger share of the firm-level wage bill.

However, when broken down by visa type and length of stay in NZ, the researchers discovered that migrants who had been in NZ for more than five years (“long term”) or were here on skills visas were generally more productive than medium-skilled NZ-born workers.

Shorter-term migrants who weren’t on skills visas had results more akin to low-skilled NZ-born workers.

The researchers also found tentative evidence that high-skilled NZ-born workers make an even stronger contribution to output, and are paid more, when they work in firms with higher proportions of migrants, suggesting the two groups have complementary skills.

‘Are migrants good or bad for the economy?’ was the wrong question to be asking, said the commission’s head of research Philip Stevens.

He told BusinessDesk the results varied across the different migrant groups, with the productivity impacts a combination of who they are and where they work.

Migrants are more concentrated in industries where NZ-born workers are more likely to be low-skilled – but wherever they're working, they were contributing, said Stevens.

‘Astonishing resource’

The research used Statistics NZ’s Integrated Data Infrastructure (IDI) which takes data about people from many different sources and links them together in one large database.

Stevens said it was an “astonishing resource” because it had good coverage of the whole population rather than just having to rely on a survey sample.

“One of its main powers is joining lots of pieces of data together.”

Data included tax records that match employers to workers who were then matched by Statistics NZ to their immigration status before being provided to the researchers on an anonymised basis.

The research team analysed data for people who worked in for-profit firms from 2004-19, that is, up until just before the pandemic turned off the migration tap.

It was built on a previous project which classified New Zealanders according to the market value of their skills, with highly skilled defined as the top 25%, low skilled in the bottom 25%, and medium-skilled in the remaining 50%.

While industries varied in their reliance on migrants, they found that almost every firm employed at least one long-term non-Australian migrant.

This proportion had been gradually trending up over time, however, the number employing recent migrants was cyclical, slowing down with the Global Financial Crisis (GFC) and not picking up again until about 2015.

The data showed that migrants were generally being paid on par with their productivity impacts, except for the shorter-term skilled residents who earned a premium.

Stevens said one explanation for the premium was to provide them with an incentive to relocate to a distant country like NZ.

Another possibility was that it represented the future value of their work.

Market fit

“There are other things that these people bring in as well, that aren't so directly related to their labour, such as knowledge of foreign markets.

“Whenever I do any business, this year, next year, whenever, I know some stuff about that market that I didn't know before, and that gives me value, and I'm willing to pay for that.”

They may also have knowledge that flows over to other people – while the results were still tentative, they found evidence highly skilled New Zealanders were far more productive when they worked in firms with lots of migrants.

For example, a product developer working alongside a migrant could create something that had a better market fit.

Stevens said NZ would always struggle with being so distant from the world’s population centres, where most knowledge of how to create value was dispersed.

One way around that is to go abroad: “The other way is to bring abroad here.”