Is immigration from the EU pushing down the wages of British workers, especially the low paid? This has become a central theme for the Leave campaign. The Sun reported:
“Open-door immigration knocks 10% of UK wages, claims Iain Duncan Smith…He quoted a Bank of England report that found wages fall by 2% for every 10% increase in immigration. Calling for voters to back Leave on June 23, Mr Duncan Smith said: “We have seen a 50% rise in immigration, which means around a 10% fall in wages.”
Boris Johnson and Gisela Stuart, not coincidentally, repeated this claim in their ITV debate
“There is a 10% growth in immigration and a 2% reduction in wages and that bears thinking about”
The problem is that Mr Duncan Smith’s arithmetic is simply wrong, by a factor of at perhaps 25. It’s true that net migration has risen by about 50% over the last two years. But that’s not the right number to look at. The Bank of England paper he quotes is talking not about the immigration rate, but the number of immigrants as a proportion of the workforce – percentage points, not %.
And how much has that risen over the same period? Not by 50 percentage points. Or even 10 percentage points. But by about 2 percentage points. The implied impact on wages, then, wouldn’t be a fall of 10%, but rather of about 0.4%. Actually, it would be considerably lower than this, since the numbers from the Bank report refer only to wages in one sector (semi/low skilled service workers), not for all workers