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Shrinking the ethnicity pay gap

UK firms may be asked to publish data highlighting their ethnicity pay gap, in the aftermath of a consultation launched by Prime Minister Theresa May. This is part of a wider plan to increase participation of ethnic minorities across all parts of the labour market.

Number 10 anticipates that these disclosures could produce similar results to the gender pay data that firms with more than 250 employees had to publish earlier this year, which highlighted a significant contrast between the incomes of men and women.

Following her seminal speech as Prime Minister two years ago, where she spoke about the “burning injustice” surrounding racial disparities in the workforce, the current state of the nation will make for unpleasant listening for Mrs May. A report by think tank The Resolution Foundation found that there is a 17% pay gap between the median black man and median white man. That equates to a £7,000 per year difference.

Theresa May [said] that many employees from ethnic minority backgrounds feel that they are “hitting a brick wall” when it came to career progression

Of course, the term ‘ethnic minority’ is incredibly vague, with many different races that fall under this umbrella term. Therefore, looking beneath the surface is very important to understand how to identify and alleviate these economic problems. For example, one-third of British-Indian households have a weekly income of at least £1000 above their white counterparts, which paints a very different picture to Pakistani households.

The Equality and Human Rights Commission attributes these differences largely to factors such as differences in occupation, age and education. Indeed, data points towards some truth in these theories. Managerial and professional roles are least common amongst men and women that are Pakistani/Bangladeshi as well as black. It is data like this which has prompted Theresa May to say that many employees from ethnic minority backgrounds feel that they are “hitting a brick wall” when it came to career progression.

Whilst more information is certainly welcome, on its own, the wage gap data will not prove very useful. An issue highlighted by Len Shackleton, Research Fellow at the Institute of Economic Affairs, is that if closing the wage gap is all that employers care about, this target may be achieved in ways that actually damage the economic status of those that we are trying to help. The data published may encourage employers to merely outsource low paid work or give preference to white candidates, so that the payment of low wages to a Bangladeshi woman doesn’t end up on their books. Technically, they have closed their wage gap, but it would mean less opportunities for minorities. This is known in economics as Goodhart’s law, where focusing on rudimentary indicators lead to behavioural change which will yield misleading statistics surrounding the state of society.

[Lammy] describes Oxbridge as “a bastion of white, middle class, southern privilege”

Furthermore, the measures success will depend upon the specificity of the variables. For example, the term ‘Black African’ would apply to both relatively wealthy skilled professionals coming from Zimbabwe as well as lower-skilled workers from Somalia. This could mean that many Somalians wouldn’t receive enough support from the government.

Therefore, underlying structural changes may prove useful in tandem with this new measure.

Progress in education is seen as a good yardstick for measuring this equity. But as the number of people from ethnic minority backgrounds going to university has risen, there still appears to be more issues regarding racial inequality than we can comprehend. David Lammy, the Labour MP for Tottenham, argues that as long as the institutions that make up Britain are ethnically homogenous, problems will continue to persist. He describes Oxbridge as “a bastion of white, middle class, southern privilege”.  This underrepresentation is totemic amongst other sections of the establishment, particularly within the media and the civil service. If the people who set the agenda are not from minority backgrounds, there is a chance that their voices will become drowned out.

In defence of the government, there has been progress in recent years regarding the presence of minorities in elite institutions. For example, the UK Civil Service run a summer internship specifically for people from underrepresented backgrounds (available here for those interested). Firms such as KPMG and Lloyds Bank have signed up to the Race at Work Charter, a new proposal which commits organisations to actively improving the progression and representation of minorities at the top of business.

If equity is ever going to be ingrained in the DNA of Britain, the double-helix that makes up the state is going to have to be heavily reconstructed

Something that is inextricably connected to race is class. Whilst there have been improvements in the labour market, the majority of insecure, temporary work that exists in today’s gig economy is performed by ethnic minorities.

David Lammy advocates class-based affirmative action alongside pay gap reports. This would involve giving a preference to disadvantaged people who are attempting to gain university places, internships and jobs, to try and compensate for previous difficulties they may have faced.

The above measures are all welcome steps in the struggle to achieve economic parity. What may prove to be the most helpful policies may not be the large projects set out in recent weeks, but a plethora of small tweaks across every crack, every fissure that constitutes Her Majesty’s Government. If equity is ever going to be ingrained in the DNA of Britain, the double-helix that makes up the state is going to have to be heavily reconstructed.

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