“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.”
“It says a 10 per cent rise in immigration would result in a one-third of one pence diminution in average wages.”
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.
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.
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.