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Leave camp distorts Bank of England migrant wage research

by Jack Schickler | 12.06.2016

Brexiteers are used to downplaying the findings of the Bank of England – which has described Brexit as the “most immediate and significant risk” facing the UK economy. Now they have taken to misrepresenting its work.

Citing the Bank’s research, Iain Duncan Smith is quoted in the Sun as saying: “We have seen a 50% rise in immigration, which means around a 10% fall in wages.” The research was also referred to by Boris Johnson and Nigel Farage in their TV debates last week.

The Leave camp’s key error is to confuse percent increases and percentage point increases. The Bank concluded that in the semi/unskilled services sector, “a 10 percentage point rise in the proportion of immigrants is associated with a 2 percent reduction in pay”. It did not say that a “for every 10% growth in immigration, there is a 2% reduction in wages”, as Boris claimed.

Now it is, of course, easy to confuse percent and percentage points. To illustrate the difference, if migrant numbers doubled from 10% to 20% of the workforce, that would be a rise of 100%, but just 10 percentage points.

As Jonathan Portes of the National Institute for Economic and Social Research notes, Duncan Smith’s error is out by a factor of 25. While there has been a 50% increase in net migration over the last two years, the proportion of migrants in the workforce is up just 2 percentage points. For the kind of change Duncan Smith talks about, you’d need over half the workforce to be migrants.

The Leave camp’s other error is to take research that refers to less skilled services workers and to say that it relates to the entire workforce. The Bank found a smaller or zero impact on native workers in other sectors. It’s also worth noting that its research referred to all migration, not specifically EU migration.

Portes has crunched the numbers for the less skilled service sector, using the Bank’s research. He found that in the eight years after the EU enlarged to the east in 2004, the impact of migration on Brits’ wages in this sector was “equivalent to a reduced annual pay rise of about a penny an hour”.

As Portes puts it, the decrease for the low-waged is “not nothing”, but other factors will have had far bigger impacts. And, don’t forget, the economic turmoil that would follow a vote to leave the EU would be very damaging to the interests of the low paid.

Vote Leave did not respond to our request for comment.

Edited by Hugo Dixon