‘Bank of England says that migrants are holding down wages’ the headlines screamed this morning. Yet Mark Carney, when interviewed on the Today programme this morning, spun a slightly different story. Migrants bear some responsibility for downwards pressure on wages, he said, but not so much as another group of people: British workers in the 50s and 60s who are returning from retirement, or who never retired in the first place. Over the past two years, net migration is up by 50,000, but that number is dwarfed by 300,000 people whom the Bank of England would normally have expected to have retired by now, but who have carried on in the workplace. In addition, workers are wanting to work extra hours – equivalent to having an extra 200,000 to 300,000 people in the workforce. In other words, labour rates are being kept down chiefly because British workers are boosting the supply of labour faster than the economy can create jobs.
Carney did not say so, but there is a clear reason why we have a growing class of the unretired. Thanks to low investment returns, and especially ultra-low savings and annuity rates, people who previously would have been able to retire are no longer able to do so. Low interest rates are helping to depress wages, which in turn are helping to keep interest rates low. It is what is known as a positive feedback system. You can’t blame the unretired for coming back to the workplace in order to maintain their standard of living, even if their actions are helping to depress the return on their savings further still. But then neither can you blame migrants.