Mind the (ethnicity pay) gap

On 9 July 2019, the Office of National Statistics (ONS) published statistics on its analysis of its annual population survey which stated that the UK workforce is made up of the following:

• 79.5% White British
• 7.9% White Other
• 3.2% African, Caribbean, Black British
• 2.9% Indian
• 1.5% Pakistani
• 1.5% Other Ethic Group
• 1.2% Mixed/Multiple Ethnic Groups
• 1.1% Any other Asian
• 0.7% Bangladeshi
• 0.5% Chinese.

Another interesting statistic was the average wage for the various ethnicities as follows:

• £15.75 per hour for Chinese
• £13.47 per hour for Indian
• £12.03 per hour for White British
• £10.00 per hour for Pakistani
• £9.60 per hour for Bangladeshi.

At first glance, the statistics are quite concerning and there is a huge disparity between the top average wage and the bottom.  It is therefore quite easy to see why commentators are quick to jump on the figures as evidence that compulsory ethnicity pay gap reporting should be introduced.

The Government closed its consultation on introducing an ethnicity pay-gap reporting system, akin to the current gender pay-gap reporting that we have, earlier this year.  We await the outcome.

Current requirements

The current requirements for the gender pay-gap reporting is that it applies only to companies with 250 or more employers at a certain date through the year.  However, there are talks about lowering this to 50 and requiring organisations to put in place reports giving context of their results and action plans to rectify any imbalances.

However, it strikes us that the words of warning in the ONS report must be taken seriously when it discusses smaller percentages of workers:

“The estimates of average hourly pay and subsequently the pay gaps are likely to be more volatile or inaccurate for the ethnic groups with smaller sample sizes such as these.”

The above is a quote taken when the report discusses the smaller proportions of Bangladeshi and Chinese ethnic groups.  However, in light of the fact that “White British” takes up circa 80% of the results and “White Other” a further circa 8%, the other 8 categories make up just 12% of the results, which we consider calls into question the reliability of the results, which in turn raises the question of whether further information should be obtained before placing an additional reporting requirement on employers.

The report also considered regional differences in ethnicity pay divides.  London, which has the highest proportion of its population classified as an ethnic minority group, also has the largest pay gap of 21.7%.  In contrast, in the north-east of England employees from an ethnic minority group had average earnings that were 6.5% more than the average earnings of white employees.

You may be interested to read a 2017 Government produced a report called “Race in the Workplace”.  This set out actions for businesses and government to improve the prospects of ethnic minority groups.  It considered that if workers from ethnic minority groups are able to play an equal part in the job market, this could add an additional £24bn to the UK economy, which is beneficial to everyone.

There are no firm plans at the moment to introduce ethnicity pay-gap reporting but it is a hot topic (a bit like the current weather), so watch this space!

For more information, please visit: Ethnicity pay gaps in Britain: 2018.