Ethnic minority workers earn much less than white counterparts within the same firm – new findings
- Written by John Forth, Senior Lecturer of Human Resources Management, City, University of London
Ethnic minorities make up an ever larger share of the UK workforce. Where just over 6%[1] of all workers were from minority backgrounds 20 years ago, now it’s nearly 14%.
Yet employees from non-white ethnic groups still tend to earn less than similarly qualified white employees. The overall gap in median wages was 2% in 2019, according to the latest figures[2] from the UK’s Office for National Statistics. However, after taking account of other differences, such as age and education, the current gap widens to around 10%. A recent Bank of England study[3] estimated the gap to be 10% for men and 9% for women.
Ethnic minorities’ share of all UK jobs 2002-22
The gap can’t be explained by differences in other rewards.
Ground Picture[8]
Our analysis also accounts for differences in qualifications and years of experience between white and non-white workers. Indeed, in the years covered by our study, ethnic minorities were more likely than white employees to feel over-skilled in their role.
In light of such findings, the broad picture is therefore consistent with ethnic minority employees being paid unfairly. We can’t be categorical that there is discrimination, although it is worth pointing out that its existence in the recruitment process is well established in the UK[9] and other countries[10].
What can be done
The UK government opted to back voluntary pay reporting in March after rejecting a recommendation[11] from the Commission on Race and Ethnic Disparities that it should be mandatory. The Department of Business, Energy and Industrial Strategy is now planning to publish guidance to employers on voluntary ethnicity pay reporting.
This is despite the fact that a requirement for all UK firms with 250 or more employees to report on their gender wage gap has been found to reduce it by 15% to 20%[12].
Our new study looks specifically at the effect of pay monitoring on the ethnic wage gap. Many large employers are now monitoring data on pay and ethnicity[13]. In 2011, only 3% of all employers were reviewing relative pay rates by ethnicity. We found that the gap was no smaller in these workplaces than in workplaces that were not.
What else can be done to address the problem? To encourage fairer pay and a more transparent pay structure, our study identifies the importance of job evaluation. This is used to systematically assess the relative value (or comparable worth) of a job in relation to other jobs within the workplace.
Our study found that the average ethnic wage gap in workplaces with a job evaluation scheme was one-third smaller than in workplaces without such a scheme. The increased transparency that such schemes can engender is one route, it seems, towards fairness in wage setting. The ethnic wage penalty was also one-third smaller in workplaces with a recognised trade union.
References^ just over 6% (www.ons.gov.uk)^ according to the latest figures (www.ons.gov.uk)^ Bank of England study (www.bankofengland.co.uk)^ ONS (www.ons.gov.uk)^ our new study (onlinelibrary.wiley.com)^ should only be (www.bdbf.co.uk)^ previous findings (www.researchgate.net)^ Ground Picture (www.shutterstock.com)^ in the UK (onlinelibrary.wiley.com)^ other countries (academic.oup.com)^ a recommendation (assets.publishing.service.gov.uk)^ by 15% to 20% (papers.ssrn.com)^ monitoring data on pay and ethnicity (www.bitc.org.uk)
