Ethnicity pay gap reporting

87 per cent of people in the UK are White, and 13 per cent belong to a Black, Asian, Mixed or Other ethnic group. Some, but not all, ethnic minority men and women experience an ethnicity pay gap; this is defined as the difference in earnings of men or women from various ethnic minority groups as a percentage of White British men’s or women’s earnings.

Unlike the data on the gender pay gap, which comes for the Annual Survey of Hours and Earnings, the data on the earnings of employees by ethnicity comes from the Labour Force Survey, an employment study of the UK population. The two data sets are not directly comparable, but, as with gender, employees’ pay reflects factors besides ethnicity, such as the industry they work in and their occupation, qualifications, experience and seniority.

The figures for 2017 show that:

  • The average (median) hourly pay for White people was £11.34, which was 10p higher than the average hourly pay for people from all other ethnic groups combined
  • People from the Indian ethnic group had the highest hourly pay on average, earning £13.14, while people from the Pakistani/Bangladeshi ethnic groups earned the lowest, at £9.52 on average
  • People from all ethnic groups except for Indian had a lower average hourly pay level than those from the White ethnic group.

You can find out more about ethnicity in the UK on the Government’s Ethnicity in the UK website.

In February 2017 the Mc Gregor Smith Review of Race in the Workplace set out recommendations for employers in the public and private sectors to improve diversity within their organisations. The report also made recommendations to Government.

A consultation on ethnicity pay gap reporting

In October 2018, following on from the second report of the Mc Gregor Smith Review, the Government announced a consultation on ethnicity pay gap reporting, asking for views on ethnicity pay reporting by employers. The consultation document sets out options and asks questions on what ethnicity pay information should be reported by employers to allow for meaningful action, who should be expected to report, and next steps. The objective of the consultation is to enable government and employers to move forward in a consistent and transparent way.

Consultation responses will inform future government policy on ethnicity pay reporting. The consultation runs until the 11th January 2019, and you can find the consultation document here.

Enquiries to: Ethnicity Pay Reporting Team, Department for Business, Energy & Industrial Strategy, Spur 1, 1st Floor, 1 Victoria Street, London, SW1H OET       Tel: 020 7215 5000

Email: ethnicitypayreporting@beis.gov.uk

Background reading

The consultation document refers to other documents which it would be useful to read:

The McGregor-Smith Review

The McGregor-Smith Review One Year On

Delivering Through Diversity

The Ethnicity Pay Gap

Opportunities Knocked? Exploring Pay Penalties among the UK’s Ethnic Minorities

New challenges

The ethnicity pay gap presents new challenges, not least because, in contrast to gender, comparatively little research has been carried out, and its causes are not well understood, but even so, it is apparent that ethnic minorities earn systematically less than their White counterparts. Nationality, and in particular, the country from which the employee is recruited, also impact on the ethnicity pay gap, in ways which are not yet fully understood. Gender, age, and religion all interact with ethnicity, meaning that ethnicity cannot be treated in isolation, but that initiatives will have to adopt an intersectional approach.

EqualPayPortal has been working with Professor Carol Woodhams, of the University of Surrey to explore how ethnicity pay gap reporting might work in practice.

It is easy to see why taking the regulations as they apply to gender and applying them also to ethnicity might be attractive, but whereas in general, sex is a binary variable (male or female), and, for tax and national insurance purposes, employers are already capturing information on employees’ pay by gender, the situation with regards to ethnicity is much less straightforward.

Not all organisations will be recording ethnicity, which means that before pay gap reporting could be introduced, employers – and employees – intended to be brought within the scope of any future regulations would first need to be encouraged to do adopt ethnic monitoring. Ethnic monitoring is voluntary, and its success depends upon the willingness of employees to declare their ethnicity, and it remains to be seen how many would be willing to do so, and how accurate that self-reporting might be.

Moreover, ethnicity is a multi-valued measure and data will have to be collated and analysed according to a number of categories. The Office for National Statistics currently groups individuals into 19 ethnic groups, and, in the interests of comparability with national statistics on ethnic pay gaps, it is likely that employers would be asked to do the same, or to collate information using a narrower range of categories that has previously been used.

In addition, to properly assess pay gaps due to ethnicity, employers would have to compare not only their ‘White British’ pay with that of employees in the agreed categories, but also to compare each of the groups with all of the others. And, given what we already know about the correlations between gender and ethnicity, and between pay gaps and hours of work, for the results to be meaningful, employers would also have to consider each of the groups by gender and by part-time/full-time.

Woodham’s work with NHS Trusts

In her work with NHS Trusts, Woodhams used seven categories: White British, White EU, White International,  Black African, Indian Subcontinent Asian, South Asian (including Chinese) and ‘other / mixed ethnicity’. Category membership was self-nominated, as is likely to be the case for ethnicity pay gap reporting.

Woodhams’ work has shown that, even with this narrower range of categories, identifying ethnic pay gaps at workplace level is a sophisticated exercise, which may be beyond the capacity of organisations unfamiliar with multivariate analysis. Further layers of complexity arise when the data has been analysed, in that the range of factors potentially contributing to any pay gap could be larger than that for gender.

What drives the ethnicity pay gap?

For gender the contributory factors are, broadly, education, occupational segregation (both vertical and horizontal), the differential impact of caring responsibilities, and discrimination. But for ethnic minorities, factors such as qualifications (as distinct from education), length of time in the job, nationality (that is, whether people are immigrants or were born in Britain) and where the jobholder was recruited from (from within Britain, or from, say, Europe or Asia), can have a major impact on the size of any pay gap. For example, for an employee self-classifying as White Other or White International, a pay gap may be influenced by whether their qualifications were obtained in this country or in Europe, while the pay gap for an employee classifying themselves as South East Asian might vary according to whether they were born in Britain or in South East Asia, and/or according to whether they were recruited here or abroad.  And in some organisations length of service overseas (as a proxy for experience) may also have an impact.

So, whereas with gender pay gap reporting it is relatively easy to produce a broad-brush but reasonably accurate picture of the structure of the gender pay gap, reporting on ethnic pay gaps will require employers to record a whole range of biographical information about their employees and to be able to manipulate this in ways that produce meaningful information.

To put it simply, the ethnicity pay gap is much more complex than the gender pay gap, and there is some way to go before we are able to develop the kind of in-depth understanding that will enable us to come up with the appropriate solutions.

 Relevant research

In order of newness:

Caught at the Crossroads, an intersectional approach to gender and ethnicity pay gaps  UCEA, November 2018

Measuring and Reporting on Disability and Ethnicity Pay Gaps Equality and Human Rights Commission, 2018

Multiple disadvantage and wage growth: the effect of merit pay on pay gaps  Woodhams, Lupton, Perkins & Cowling, University of Exeter, 2015

The Presence of Ethnic Minority and Disabled men in Feminised Work: Intersectionality, Vertical Segregation and the Glass Escalator Woodhams, Lupton & Cowling, University of Exeter, 2014

Understanding the ethnic pay gap in Britain,  Brynin & Gueveli,  ISER, University of Essex, 2014

Last updated 4th December 2018