How Does Immigration Shape Average Labor Productivity? Evidence from the CPS

Labor productivity in the U.S.—measured by the Bureau of Labor Statistics (BLS) as output per hour worked—was 2.5% higher by the end of 2025 relative to a year earlier. Understanding what drove this growth matters for forecasters, policymakers and anyone thinking about the long-run trajectory of U.S. living standards. One candidate explanation is workforce composition: If the mix of workers shifts toward those with greater skill or experience, average productivity could rise even if no individual worker becomes more productive.

In this blog post, we ask how much of the evolution in average U.S. labor productivity in the post-COVID-19-pandemic economy can be attributed to changes in the composition of the workforce, with a particular focus on immigration. The short answer: very little.

Measuring Worker Quality

To isolate the role of workforce composition, we drew on the Current Population Survey (CPS) and constructed a measure of worker quality for each worker in the dataset. Using 2023-25 data from the Annual Social and Economic Supplement (ASEC) to the CPS, we estimated hourly wages as a function of work experience, occupation, marital status and race. We created these estimates separately for groups based on sex, education level, full- or part-time status, and country of birth. This gave us a set of group-specific coefficients that translate a worker’s observable characteristics into a predicted wage, with year-fixed effects held constant so the resulting quality measure is time-invariant.

We then applied these coefficients to each employed worker in monthly CPS data from 2022 to 2026, computing workers’ predicted efficiency based on their characteristics. Averaging this measure across all employed workers in a given quarter, weighted by hours worked and CPS weights, yields a quarterly index of average workforce quality.One caveat: The CPS weights are calibrated to Census Bureau population controls defined by age, sex, race and Hispanic origin—not by nativity (whether someone was born in the U.S. or abroad) or citizenship status. During periods of rapid immigration change, this means the survey may not fully capture the true magnitude of shifts in the foreign-born share of the workforce. See this recent On the Economy blog post by Alexander Bick and Kevin Bloodworth II for a detailed discussion. We compared this index with the BLS nonfarm business productivity series, which reflects both compositional shifts in the labor force and productivity gains at the worker level.

Workforce Composition Shifted, but Not in One Direction

The first figure below traces changes in U.S. workforce composition since the first quarter of 2023 using employment share by place of birth. In the postpandemic economy, the U.S.-born share of employment decreased steadily and substantially, falling roughly 1 percentage point through the end of 2024. That decline was almost the mirror image of rising employment share among foreign-born workers.

However, this trend reversed significantly in 2025, with the foreign-born share of employment declining noticeably, consistent with tighter immigration enforcement policies that took effect early that year. By the end of 2025, the employment share of Latin American workers—those from Mexico, Central America and South America—was only 0.37 percentage points higher than in early 2023, while the employment share of workers from the rest of the world—Europe, Asia and other regions—was only 0.08 percentage points higher. On net, the U.S. workforce became meaningfully more immigrant-heavy from 2023 to 2024 and then partially reversed, all within a three-year window.

A Small Net Effect on Productivity

The next figure shows that, despite these compositional changes, our CPS-based worker quality index barely moved. It hovered within less than 1% of its first quarter 2023 level throughout the entire period, while BLS nonfarm business productivity climbed 8.2% over the same span. The worker quality index declined by approximately 0.6% in the second half of 2023 and again in 2024, but it has since recovered. In fact, in early 2025 the worker quality index was slightly above its first quarter 2023 level.

Why would swings in workforce composition leave average productivity nearly unchanged? Two reasons.

First, the shifts in employment shares by place of birth, while noticeable, are small in absolute terms. Even a 1 percentage point rise in the U.S. employment share of lower-productivity, Latin American-born workers moved the needle on aggregate worker quality only modestly—far less than the roughly 8% productivity gain recorded by the BLS over the period.

Second, not all immigrants are less productive than U.S.-born workers. Central American immigrants—who accounted for the largest single increment of the foreign-born workforce share—earn wages that fall about 25% below the U.S.-born average. In isolation, their growing employment shares put modest downward pressure on average productivity. But workers arriving from Europe, Asia and other high-income regions display the opposite pattern: Their predicted wages exceed the U.S.-born average by about 20%, reflecting higher educational attainment and more highly compensated occupations.For a detailed discussion of earnings differences between immigrants and native-born workers, see Serdar Birinci, Fernando Leibovici and Kurt See’s 2023 Economic Synopses article. As their employment shares rose alongside those of Central American workers, their positive contribution to average productivity largely offset the drag from Latin American-born workers. The two effects partially canceled out, leaving the aggregate index almost flat.

This is not a mechanical artifact of our method. It reflects a genuine feature of the immigrant workforce: Immigration to the U.S. draws from both ends of the skill distribution, and the productivity implications depend critically on which flows dominate.

What Is Driving Labor Productivity Growth?

Over the past few years, the composition of the U.S. workforce—who is working and what skills they bring—has been shaped by a surge in and then partial reversal of foreign-born employment. Yet these shifts left average labor quality essentially flat. The productivity-dampening effect of rising employment share for workers born in Latin America—particularly Central America—was partially offset by the productivity-enhancing effect of rising employment share for those from Europe, Asia and other regions.

If workforce composition explains almost none of the roughly 8% rise in U.S. labor productivity since 2023, the growth must originate elsewhere—most likely capital-deepening, technological adoption (including AI tools) and sector-level output gains that are not captured by individual workers’ observable characteristics. The composition channel, whatever its direction, is simply too small to account for the aggregate trend.

Notes

1. One caveat: The CPS weights are calibrated to Census Bureau population controls defined by age, sex, race and Hispanic origin—not by nativity (whether someone was born in the U.S. or abroad) or citizenship status. During periods of rapid immigration change, this means the survey may not fully capture the true magnitude of shifts in the foreign-born share of the workforce. See this recent On the Economy blog post by Alexander Bick and Kevin Bloodworth II for a detailed discussion.
2. For a detailed discussion of earnings differences between immigrants and native-born workers, see Serdar Birinci, Fernando Leibovici and Kurt See’s 2023 Economic Synopses article.