May 18, 2015
From the Daily Mail:
Mark Carney, head of the Bank of England, issued stark warning Influx of foreign workers is threatening economy by holding down wages
He said rates of immigration explained why pay rises have been subdued
By IAN DRURY and HUGO DUNCAN FOR THE DAILY MAIL PUBLISHED: 06:40 EST, 13 May 2015
A huge influx of foreign workers is threatening the economy by holding down wages, the head of the Bank of England warned yesterday.
In a dramatic intervention, Mark Carney said high rates of immigration helped explain why pay rises had been subdued for several years.
Carney is from Canada.
He said sluggish earnings were a key risk to the country’s recovery from the worst recession in a century. The comments coincide with the release of figures showing a record 4.8million foreigners work in Britain – making up one sixth of the labour force. Almost two million of them are from the European Union – another all-time high.
Workers from Poland and other former Eastern Bloc countries have taken 942,000 jobs. …
Mr Carney’s remarks will be noted with interest in Westminster and Brussels because he has avoided the political arena since joining the BoE in July 2013. EU chiefs are desperate for Britain to vote to remain in Europe in the promised in/out referendum.
Speaking in public for the first time since the election, the Canadian bank governor said the UK labour force had ‘expanded significantly’ in recent years. This is partly explained by an increase in older workers and a willingness to work longer hours but Mr Carney also blamed ‘strong population growth partly driven by net migration’.
Mr Carney said the increase in the size of the workforce had ‘contained wage growth in the face of robust employment growth’. He added: ‘A key risk [to the economy] is that these subdued growth rates continue.’
Gerwyn Davies, an adviser at the Chartered Institute of Personnel and Development, said: ‘The increased supply of workers, especially older workers and EU migrants, means that employers are under little or no recruitment pressure to boost pay growth.
When I was majoring in economics in college, I heard of this obscure concept called the law of supply and demand. But didn’t Giovanni Peri disprove that once and for all by showing that in California in 2005, things were looking up, up, up, with strawberry pickers buying $700,000 houses?
‘Until this supply begins to diminish, employers will be under little pressure to increase starting salaries and, even then, we still have some way to go to see wages significantly exceed living costs.’
But, but, but didn’t economist David Card explode obsolete supply and demand reasoning by showing that in Miami in the years following the Mariel Boat Lift incomes were high by citing the expensive lifestyles of Tony Montana, Sonny Crockett and Rico Tubbs ?
Alp Mehmet, of the campaign group MigrationWatch UK, said: ‘While some people have resisted the view that mass immigration exerts downward pressure on wages, the Bank of England report shows that such a view is neither extreme nor unjustified and that the impact of immigration is very likely affecting not just the lowest-paid. It is a key issue about which the government needs to be clear in its impending negotiations with the rest of the EU.’