The claims
“It was a Bank of England study which showed that for every 10 per cent increase in immigration there was 2 per cent reduction in wages.”
Boris Johnson
“It says a 10 per cent rise in immigration would result in a one-third of one pence diminution in average wages.”
Alex Salmond
The background
Boris Johnson got caught out yesterday when he was forced to admit he hadn’t actually read a Bank of England study he used in an attack on the EU.
The former Mayor of London and Vote Leave campaigner was sparring with ex-SNP leader Alex Salmond in an online Brexit debate organised by the Daily Telegraph and the Huffington post.
Mr Johnson claimed that people on low incomes would see their wages rise if Britain leaves the EU, citing the Bank of England as a source.
He said: “It was a Bank of England study which showed that for every 10 per cent increase in immigration, there was a 2 per cent reduction in wages.”
“Have you actually read it?” Mr Salmond asked. Mr Johnson was forced to admit: “I have not read that study.”
The former Scottish First Minister said the study in fact stated that the real reduction in average wages was “one third of one pence”.
That sounds like game, set and match to Mr Salmond, but we think there is something to be said on both sides.
The analysis
This is the Bank of England paper the two men were arguing about.
Mr Salmond is correct to say that the Bank finds: “If the proportion of immigrants working in a particular occupation rises by 10 percentage points, the occupational wage falls by around 0.3 percent. This is a relatively small effect.”
But Mr Johnson’s grasp of the contents of the study wasn’t entirely faulty.
As well as looking at average wages across the economy as a whole, the analysts divided jobs into different sectors.
They found that native wages are likely to fall the most as a result of immigration in the area of “semi/unskilled services”.
The study says: “A 10 percentage point rise in the proportion of immigrants working in semi/unskilled services — that is, in care homes, bars, shops, restaurants, cleaning, for example — leads to a 1.88 per cent reduction in pay.”
That’s close to the 2 per cent quoted by Boris Johnson, and if he had talked about a “reduction in wages for the low-skilled” rather than just “a reduction in wages” in general, he would have been right.
(Note that the “10 percentage point rise” scenario the Bank uses is much bigger than the “10 per cent rise” mentioned by both men. A 10 per cent rise in the EU-born population of the UK is 300,000. A 10 percentage point rise is about 9 million.)
There are other studies in this area that have come up with similar results. Most find that the effect of even a large increase of immigration on overall wages is extremely small, whether positive or negative.
This 2008 paper from UCL’s Centre for Research and Analysis of Migration found a slight positive effect on overall wages, but said immigration depressed wages for the very low-paid.
Does all this mean that Boris Johnson has snatched defeat from the jaws of victory? Is he right to suggest that wages would rise if we left the EU? It’s complicated.
First, even if you think immigration is bad for wages, a vote for Brexit will not necessarily secure lower immigration from the EU.
It’s possible that Britain might leave the EU but negotiate continued access to the EU’s single market by remaining a member of the European Economic Area.
This is the option that the Treasury, the OECD, the LSE’s Centre for Economic Performance and NIESR and the Institute for Fiscal Studies think will cause the least harm to the economy.
It’s the option countries like Norway have taken, and they have had to continue to sign up to the principle of the free movement of EU citizens as part of the admission price.
The second point is that Brexit might have various other impacts on the economy which could ultimately lead to lower wages, according to the Treasury and NIESR, among others.
The verdict
By his own admission, Boris Johnson’s grasp of the detail when it comes to research on immigration and wages was lacking yesterday.
But he wasn’t far off when he said the Bank of England has found that immigration can lower wages. That is true of lower-skilled workers.
Mr Salmond was right to say that the effect across all occupations was tiny. This chimes with other research in the field.
Does all this prove that leaving the EU will raise wages for people on low incomes? Not necessarily – it’s more complicated than that.
Sorry, you got your fact check wrong if you think that the 10% more migration refers to 10% more people coming in each year.
The Bank of England paper says is that if, relative to the total number of workers in an occupation 10% more of these workers are now migrant workers, then wages drop by 2%.
In other words: suppose the 2% of Boris Johnson applies to all sectors, not just to the most responsive sectors, which will overestimate the overall effect. To get a shift of 10% in the working age population from natives to migrants, we need an inflow of larger than 10% of the working age population in immigrants, or about 4 million working age migrants. At the current rate of net migration (330,000), assuming that *all* of them are working age population, a 10% increase in the net migration flow would take more than 100 years to give you an additional 2% drop in wage!
Hi Luigi – we were just trying to give an example to illustrate the difference between “per cent” and “percentage points”, not to suggest the Bank was talking about overall migration in its paper.
Nice observation @luigi
Actually not sure what is being illustrated. Given the sheer volume of unsubstantiated claims by all involved, Mr Worrall decides to apply a ‘FactCheck’ to this ‘burning’ contention. It may help if such exercises didn’t appear to have, dare I say, ulterior motives?
You miss the (key) point that the BoE study is a bit out of date; there’s a more recent study by the LSE that concludes that actually there’s no negative effect on wages, even for the poorest workers:
http://cep.lse.ac.uk/pubs/download/brexit05.pdf
Having caught Boris Johnson misrepresenting a report that he admits he hasn’t even read, you suggest that if he had made an entirely different statement, he “would have been right”. I’m not sure you’ve quite understood the concept of fact checking.
The suggestion that “he wasn’t far off when he said the Bank of England has found that immigration can lower wages” would make some sort of sense if that was what Boris had said. But it wasn’t. If it is to mean anything, “fact-checking” has to cut through political spin, not incorporate it into its methodology. Are we to take it that Channel 4 News is now embracing the world of “post-truth politics”?
Something that is not being said is the NO IMMIGRANT sets the wage level. If employers set the wage bar lower because people will work for less because they are immigrants – who is responsible? Not the immigrant…
Cheap labour does not mean low wages as such but blatant poaching of skills. Companies used to train their own then some bright spark thought let just pinch other firms trained workers, now they have to poach the World this certaily does not help the economy. Solutions to this could be compusory employment with the company that trained you for a set time and/or tax insentives, all this will lower immigration, unemployment and give us a proper skills base like the ones we have lost example building Nuclear power stations.
I was listening to a referendum programme on 5live the other night and a HGV class 1 driver had rang in and was put on the air. He stated that he had 30+yrs driving with an agency and could pretty much pick and choose his jobs dependant on his circumstances at the time. Lately however he can no longer get any work as the new influx of migrants are willing to work for substantially less money. His boss told him this. So in this case immigration is and will continue to drive down wages
George Kennedy To start with there is no such thing as EU money.
secondly, the figure on the side of that bus should be a lot more
The BBC, ITV. Cameron and all the in side.conveniently forget to mentioned the 800 million we paid for the Greek bailout and the 7 billion we pay to Ireland for their bailout in 2012. It’s very convenient that no one seems to mention this.
i agree with andy i have had first hand experience of this my self wage compression but i also agree with isla NO IMMIGRANT sets the wage level greedy bosses do that so for me it is a fact
Channel Four all your fact checks seem to be distorted to favour the EU remain campaign, you are quite simply giving distorted information and bias.
John Williams, has it occurred to you that perhaps this is because the facts favour the Remain campaign? The case for Leaving the EU is very flimsy indeed when stripped of emotion and what can most politely be called “instinct”.