Economic benefits of cultural diversity

Surveys indicate that broadly, Australians support cultural diversity and continued immigration, and believe that multiculturalism has been good for Australia.[1,2] But whenever these policies are challenged in the public conversation, information highlighting what the benefits from cultural diversity are, and how they arise, becomes especially important. Recent studies have indicated how cultural diversity works through the economy to benefit Australian society: in areas from tourism, education, and global linkages, to the less definable but nonetheless important assets of general community vibrancy, resilience and adaptability.

International business within a globally connected marketplace

Much recent research investigating the impact of cultural diversity has focused on migrant populations, including the productivity, labour participation and taxation revenue benefits of immigration.[3] But research examining the benefits of cultural diversity on business operations in more general terms has found a positive relationship between having diverse staff members and the performance of multinational corporations. Culturally diverse staff members, particularly migrant workers, may have international connections aiding the flow of labour, goods, services and knowledge between Australia and their nation of cultural heritage.[3,4,5] Other potential benefits include lowering barriers to entry for new culturally diverse talent in an organisation[6] and increasing markets with increasingly culturally diverse populations.[7]

Education sector

Cultural diversity provides a competitive advantage in attracting international students. Education is Australia’s fourth largest export and largest service industry export, contributing $17 billion in 2014 across Australia and $5.265 billion in Victoria.[8] Cohesive cultural diversity contributes to the appeal of Australia as an education destination, and thereby to the continued growth of Australia’s education sector.

University of Arizona’s Jeffrey E Milem conducted a study assessing the impact of culturally diverse education environments in tertiary institutions. He found a range of individual educational benefits including; improving racial and cultural understanding, enhanced openness to diversity and challenges, enhanced critical thinking, and greater student satisfaction with their tertiary education experience. Benefits to the educational institution included more student-centred approaches to teaching, greater diversity in curriculum, greater diversity of staff, and more research focusing on cultural and ethnic diversity. Milem also noted wider societal benefits including a more educated citizen body and greater equity in society.[9]

Research and innovation

Recent literature also identifies increased research and innovation as a key benefit of cultural diversity.[10,11,12,13] In general terms, a diversified workforce is likely to have different skills and mindsets, which in turn are positively correlated with business, technological and cultural innovation. Migration flows have been found to empirically contribute to new innovation by increasing the knowledge, skills and cultures available. A culturally diverse workforce engages in what Gould has termed ‘creative conflict’ as different perspectives and experiences interact. Gould argues that creative conflict leads to better decision making, introduction of new ideas, and increased creativity and innovation.[14] Cultural diversity, along with high technological capabilities, contributes to the vibrancy of regional business networks and entrepreneurship.


As the tourism industry has moved towards ‘niche’ and cultural tourism, cities have developed what Syrett and Sepulveda term ‘ethnic quarters’[4] to broaden their tourism offer and capitalise on the desire for new and varied cultural experiences. Cultural events and festivals in ethnic quarters have become successful drivers for tourism to cities, increasing visitation and visitor spend.[15,16] Constructed cultural precincts (such as Chinatowns) and organic clustering of cultural groups that have limited tourism infrastructure (such as Harlem in New York City) provide tourism benefits to culturally diverse cities and provide a competitive advantage with competing tourist destinations.[17]

Diverse cuisines meet at the San Gennaro festival, New York City

Hospitality and the food industry

Cultural diversity provides increased choices for cuisines and dining options, for residents and visitors alike.[18] Exposure to culturally diverse foods and cuisines can also provide potential for diversification and creativity within the hospitality industry, as seen in the rise of fusion cuisines and restaurants. Food is often the first point of contact and exposure to different cultures.

Dandy and Pe-Pua’s research has found activities and events relating to food to be the most successful events in bringing culturally diverse community members together. Food enhances the likelihood of positive cultural interactions between culturally diverse groups, which in turn enables the development of a foundation for social cohesion and cultural exchange across a culturally diverse community. [18]

Liveability and competitiveness in the market for knowledge workers

Richard Florida argues that places’ diversity and tolerance are essential elements for attracting knowledge workers - the ‘creative class’ essential to the long term economic sustainability of cities as the world’s economy is increasingly driven by innovation and ideas.[6,12]

Resilience and tolerance

Cultural diversity has been found to enable greater tolerance - and to challenge cultural stereotypes among individuals. Crisp and Turner’s 2011 study argues that in the right circumstances, the presence of cultural diversity conflicting with commonly held cultural stereotypes challenges these constructs and encourages these stereotypes to break down. They argue that a culturally diverse society provides the necessary conditions to produce greater tolerance and understanding of different cultures by providing exposure to different faiths, ethnicities and languages.[19]

Cultural diversity brings many benefits - but they can be diluted

In sum, this research suggests several major economic benefits of cultural diversity. A greater diversity of exports and related income, for instance from culturally ‘flavoured’ products/ crafts/ skills. Additional visitor and tourist expenditure flows from the appeal of culturally diverse precincts and regions and cuisines. Additional inward capital/investment and additional opportunities for exporting arise from international connectivity between immigrants and ‘home’ countries. In turn, this leads to healthier rates of business formation, product development and innovation and, ultimately, a more productive labour force (inspired by the opportunities and new ideas which flow in culturally diverse environments).

Further, cultural diversity could be said to contribute to outcomes less able to be defined or quantified but with significant economic value. General community vibrancy, resilience and adaptability may be underpinned by cultural diversity so that shocks and challenges are better able to be met and repelled.

However, as noted by Gillian Trigg, the myriad benefits of cultural diversity are disrupted by racism and discrimination, which challenges social cohesion in Australian society. Currently, higher reported rates of discrimination and racism are felt by Middle Eastern and/or Islamic populations.[20] And the short term impacts of cultural diversity to regional development and economic growth are dependent on how migrant populations are treated and their opportunities for social mobility, according to Goldin and co-researchers. [21]

Some considerations for research

Ongoing research needs to distinguish between immigration per se and cultural diversity more broadly defined as ethnic, cultural, linguistic and faith based diversity, as the long term outcome of multicultural immigration programs. And it should take into account that the benefits and costs of cultural diversity may be experienced differently by different groups. For instance Syrett and Sepulveda note lower income neighbourhoods – which often host first and second generation international migrants - may experience the costs of poor social cohesion, such as a lack of trust and polarisation with established host communities.[7]

Footnotes and references

1. Markus, A. (2015), Mapping Social Cohesion: The Scanlon Foundation surveys 2015

2. Roy Morgan Research, October 2015,

3. Nieuwenhyson and Storer overview much of this, in Nieuwenhuyson, J., Storer, D., (2011) The economic advantages of cultural diversity in Australia, Prepared for NSW Government and Community Relations Commission.

4. Syrett, S., Sepulveda, L., (2011) ‘Realising the diversity dividend: population diversity and urban economic development’, Environment and Planning A, 43(2),

5. Kitching, J., Smallbone, D., Athayde, R., (2009) ‘Ethnic diasporas and business competitiveness: Minority-owned enterprises in London’, Journal of Ethnic and Migration Studies, 35(4)

6. Florida, R. (2008) Who’s Your City?: How the Creative Economy Is Making Where You Live the Most Important Decision of Your Life, Basic Books, New York.

7. UNESCO (2009) Investing in Cultural Diversity and International Dialogue, UNESCO.

8. Department of Education and Training (2015) Research Snapshot: Export income to Australia from international education activity in 2014, June, Australian Government, Canberra.

9. Milem, J. (2003). ‘The educational benefits of diversity: Evidence from multiple sectors’, in Chang, M., Witt, D., Jones, J., Hakuta, K. (eds.), Compelling interest: Examining the evidence on racial dynamics in higher education, Palo Alto, Stanford University Press, 126-169.

10. Qian, H., Acs Z., Stough, R. (2013) ‘Regional systems of entrepreneurship: the nexus of human capital, knowledge and new firm formation’, Journal of Economic Geography, 13(4), 559-587.

11. Niebuhr, A. (2010) ‘Migration and innovation: Does cultural diversity matter for regional R&D activity?’ Papers in Regional Science, Wiley Blackwell, 89(3)

12. Florida, R., (2002) The Rise of the Creative Class, Basic Books, New York.

13. Saxenian, A., (2011) Brain Circulation: How High Skill Immigration Makes Everyone Better Off, Brookings Institute Paper.

14. Gould, J., (2015) ‘How arts organisations can reap the benefits of cultural diversity’.

15. Fainstein, S., Powers, J., (2007) ‘Tourism and New York’s ethnic diversity: an underutilized resource?’ in Rath, J. (ed.), Tourism, Ethnic Diversity and the City, Routledge, New York.

16. Collins, J., Kunz, P., (2007) ‘Ethnic entrepreneurs, ethnic precincts and tourism: the case of Sydney Australia’ in Richards, G., Wilson, J., (eds.) Tourism, Creativity and Development, Routledge, London, 201-214

17. Hoffman, L. (2003) ‘Revalorizing the inner city: tourism and regulation in Harlem’, in Hoffman, L., Fainstein, S., Judd, D. (eds.), Cities and Visitors: Regulating people, markets and city space, Oxford: Blackwell.

18. Dandy, J., Pe-Pua, R. (2013) Research into the Current and Emerging Drivers for Social Cohesion, Social Division and Conflict in Multicultural Australia. For Joint Commonwealth, State and Territory Research Advisory Committee.

19. Crisp R., Turner, R. (2011) ‘Cognitive adaptation to the experience of social and cultural diversity’, Psychological Bulletin, 137

20. Trigg, G. (2014), Social cohesion in a multicultural Australia: The importance of human rights, speech presented at Affinity Friendship and Dialogue Iftar Dinner,Sydney.

21. Goldin, I., Cameron, G., Balarajan, M., (2010) Exceptional People: How Migration Shaped Our World and Will Define Our Future, Princeton University Press.

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