Mark Carney meets some journalists looking for a story

If you’ve read the papers today you might have seen the story about Bank of England Governor Mark Carney’s supposed intervention into the immigration debate. The Mail and the Times both covered Carney’s inflation report with this angle. The Times’s coverage was boldest, claiming that Carney had ‘waded into the debate on immigration’ by describing ‘the present high level of net migration as “a key risk” to the economy’.

This is strong stuff, and it would indeed be big news if it were true. But I'm not sure it is.

Here’s what Carney actually said:

In recent years labour supply has expanded significantly owing to higher participation rates among older workers, a greater willingness to work longer hours and strong population growth, partly driven by higher net migration. These positive labour supply shocks have contained wage growth in the face of robust employment growth. Wages have grown by around 2% in the past year – less than half the average rate before the global financial crisis – and a key risk is that these subdued growth rates continue.

Such strong growth in labour supply is unlikely to be sustained. Going forward, growth in the UK economy’s potential will increasingly depend on productivity.

It’s hard to see Carney’s exact meaning from this, and he has already distanced himself from the Times's and Mail's interpretation. As BusinessInsider’s Mike Bird points out, he’s most likely talking about a compositional effect – the average changing because we’re adding more people on the lower end of the spectrum, not because any existing worker is being made worse off.

Bird quotes the Inflation Report itself:

Bank staff estimates suggest that the changing composition of employment growth — including the mix of occupations, industries, ages and job tenures — could explain around 1 percentage point of the recent weakness in average annual earnings growth. Compositional effects will only suppress wage growth for as long as such shifts continue.

Indeed. It would be a surprise if Carney had said what the Times and Mail suggest he said. The government’s Migration Advisory Committee found in 2012 that “Studies estimating the impact of migrants on UK wages have generally found little or no impact on average wages,” although, “in some studies migrants were found to increase wages at the top of the UK wage distribution and to lower wages at the bottom.”

That means that, if there is a negative impact from immigration, it reduces wages for the workers at the bottom, but not the overall wage or productivity level, as Carney is supposed to have claimed.

A 2014 Home Office report concluded that this effect on low-paid workers was found during recessions but not periods of economic growth, and was small and temporary in any case. The effect was not present in other government studies at all.

NIESR’s study into the impact of immigration on native British productivity found it to be small but positive. In general I suspect that there is a strong relationship between how good immigration is for natives and how flexible the receiving country’s labour market is.

The Mail is the Mail, but I can’t quite understand why the Times, in particular, decided to report Carney’s remarks in this way. To misinterpret him so badly seems to almost wilfully prefer a good story to an honest one.