From borders to boardrooms: immigrants' impact on productivity

How do foreign workers affect firm productivity in Portugal? This is seemingly relevant for a country now experiencing substantial immigration flows, with a potentially strong impact on firm performance and labor market dynamics.

This study links employer- and employee-level data with balance sheet information and finds that the presence of immigrant workers does not have an unconditional effect on firm productivity. However, this finding masks a more nuanced and complex reality that emerges when different types of firms are examined more closely. Less productive firms, for instance, tend to struggle when they hire more immigrants. This negative impact might stem from challenges in effectively integrating foreign workers, possibly due to limited resources or cultural barriers within these organizations. In contrast, small firms see a boost in productivity when they employ immigrants more intensively. This positive effect suggests that immigrant workers might fill crucial gaps in smaller operations, bringing in diverse skills or taking on roles that are otherwise hard to fill. Particularly intriguing is the finding about low-skilled immigrants. Hiring more immigrants with 5-9 years of schooling increases firm productivity, perhaps because they fill essential mid-level positions.

Overall, the findings highlight that the impact of immigrant workers is not uniform but depends significantly on the firm’s characteristics, including its baseline productivity, size, and its ability to integrate a diverse workforce, and also on worker characteristics, such as their education level. This complexity presents both challenges and opportunities. It calls for business leaders to develop strategies for hiring and integrating foreign workers tailored to their organizational contexts.

Click here to go to the paper by Parisa Ghasemi, Paulino Teixeira, and Carlos Carreira.