Planning in Australia: economic benefits of cultural diversity

Posted February 23, 2017

SGS Economics and Planning Economic Benefits of Cultural Diversity

Surveys widely indicate that Australians support cultural diversity along with continued immigration. Furthermore, they believe that multiculturalism has a positive effect on Australia. [1, 2]

The benefits of cultural diversity and how they arise is of particular importance should policies be challenged by the public. Recent studies indicate how cultural diversity benefits Australian society via its economy. Not only in the areas of tourism, education, and global linkages but also with the less obvious yet valuable assets of general community vibrancy, resilience, and adaptability.

International business within a globally connected marketplace

Recent research investigating the impact of cultural diversity focuses on migrant populations and includes the productivity, labour participation, and taxation revenue benefits of immigration.[3] Studies examining the benefits of cultural diversity on business operations in more general terms found a positive relationship between diverse staff members and the performance of multinational corporations. Staff members from a diverse range of cultures and in particular migrant workers may have international connections. These connections can aid the flow of labour, goods, services, and knowledge between Australia and the workers’ home nation. [3, 4, 5] Other potential pluses include the lowering of entry barriers for new culturally diverse talent into an organisation [6] and the maximisation of those markets with an increasingly multicultural population.[7]

SGS Economics and Planning Economics Benefits of Cultural Diversity University in Melbourne

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 adds to Australia’s appeal as an education destination, and thereby to the continued growth of its 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 exclusive educational benefits. These benefits include: improving racial and cultural understanding, greater openness to diversity and challenges, enhanced critical thinking, and increased student satisfaction with their tertiary education experience. Benefits to the educational institution are more student-centred approaches to teaching, improved diversity in the curriculum, and greater diversity of staff. Add to this list, additional research focusing on cultural and ethnic diversity. Milem also noted more extensive societal benefits, such as a more educated citizen body and enhanced equity in society.[9]

Research and innovation

Recent literature identifies increased research and innovation as a key benefit of multiculturalism. [10,11,12,13] In general terms, a diversified workforce is likely to have different skills and mindsets, which in turn correlate with business, technological, and cultural innovation in a positive way. Migration flows have been found to empirically contribute to 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, the 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.

SGS Economics and Planning Chinatown Melbourne


As the tourism industry moves towards 'niche' and cultural tourism, cities have developed ethnic districts. Syrett and Sepulveda gave these areas the 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 (e.g., Chinatowns) and organic clusterings of cultural groups with limited tourism infrastructure (e.g., Harlem in New York City) provide tourism benefits to culturally diverse cities. These precincts and groups provide an advantage over competing tourist destinations. [17]

SGS Economics and Planning Melbourne market

Hospitality and the food industry

Cultural diversity provides a wider variety of cuisines and dining options, for residents and visitors alike.[18] Exposure to ethnic foods can provide the 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 introduction to a different culture.

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

Liveability and market competitiveness for knowledge workers

Richard Florida argues that diversity and tolerance are essential elements for attracting knowledge workers. The 'creative class' is vital 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 increased 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. Furthermore, stating it encourages the breakdown of such stereotypes. They put forward that a multicultural society provides the necessary conditions to promote tolerance and understanding of varying cultures. It does this by giving exposure to different faiths, ethnicities, and languages. [19]

Cultural diversity brings many benefits - but they may be watered down

SGS Economics and Planning Patrick Fensham

This research suggests several significant economic benefits of cultural diversity. A greater variety of exports and related income, for instance, from ethnic 'flavour' products, crafts, and skills. Furthermore, visitor numbers and tourist expenditure increase due to the appeal of culturally diverse areas and cuisines. While inward capital, investment, and export opportunities arise from international connectivity between immigrants and 'home' countries. In turn, this leads to healthier rates of business formation, product development, and innovation. Creating a more productive labour force, inspired by the opportunities and new ideas arising in such environments as a result.

— SGS Principal and Partner Patrick Fensham

Furthermore, cultural diversity may contribute to outcomes less able to be defined or quantified but still with significant economic value. General community vibrancy, resilience, and adaptability may be underpinned by multiculturalism, making it easier to meet and effectively deal with unforeseen challenges.

However, as noted by Gillian Trigg, the myriad benefits of cultural diversity are disrupted by racism and discrimination. These challenge social cohesion in Australian society. Higher reported rates of discrimination and racism are felt by Middle Eastern and Islamic populations.[20] According to Goldin and co-researchers, [21} the short-term impacts of cultural diversity on regional development and economic growth, are dependent on the treatment of migrant populations, and their opportunities for social mobility.

Research considerations

Ongoing research needs to distinguish between immigration per se and cultural diversity. It is possible to define this subject as ethnic, cultural, linguistic, and faith-based diversity, as the long-term outcome of multicultural immigration programs. It should also take into account that the benefits and costs of cultural diversity may be experienced differently by various groups. For instance, Syrett and Sepulveda note lower-income neighbourhoods often host first and second-generation international migrants. These neighbourhoods 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 underutilised 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.

SGS Economics Planning Pat Fensham
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