Earlier this month, Sainsbury's announced that, during Black History Month, they will be taking the opportunity to review and ultimately publish their ethnicity pay gap. The analysis on ethnicity pay gaps in Britain, released by the Office for National Statistics (ONS) on 9th July 2019, shows significant gaps remain even when education and occupation are considered, particularly for those born outside the UK. With legislation surrounding Ethnicity Pay reporting, also known as BAME (Black, Asian and Minority Ethnic) reporting on the horizon, this analysis provides the starting point for the ethnicity reporting process.
What is Ethnicity Pay Reporting?
In 2016 the government set out to examine the barriers faced by people from ethnic minority groups in the workplace and consider what could be done to address them. The 2017 report "Race in the Workplace" set out a range of actions for businesses and government to take forward to help improve employment and career prospects for those from ethnic minority backgrounds. According to the report, equal participation and progression across ethnicities could be worth an additional £24 billion to the UK’s economy per year.
To be able to address any barriers that may cause these differences in labour market experiences among different ethnicities, we must first be able to measure the disadvantage that some ethnic minorities face.
Consistent with the existing analysis of the gender pay gap, the Ethnicity Pay Gap is calculated using Annual Population Survey (APS) data as the difference between the average hourly earnings of White British and other ethnic groups as a proportion of average hourly earnings of White British earnings.
What were the key findings?
The median pay of white British workers last year was £12.03 an hour compared with £9.60 for people of Bangladeshi ethnicity and £10.00 for those of Pakistani ethnicity – meaning those with Bangladeshi heritage earn 20.1% less than white British workers. Pakistani and Bangladeshi groups that also had the lowest employment rates: 58.2% for Pakistanis and 54.9% for Bangladeshis.
Women in the Pakistani and Bangladeshi ethnic groups were significantly less likely to be in the labour force than those in other ethnic groups. The ONS suggested this could be a result of “cultural differences” as 38.1% of women from a Bangladeshi ethnic group and 32.1% of women from a Pakistani ethnic group were found to be economically inactive because they were looking after their family or home.
White workers did not have the highest median hourly pay, with employees of Chinese, Indian or mixed or multiple ethnicity all having higher rates, although this was not the case for Chinese or Indian workers born outside the UK.
Those in the younger generation of ethnic minority groups tended to have narrower pay gaps than older ethnic minority groups. For instance, the difference for the Bangladeshi ethnic group compared with white British workers was 3.1% among 16- to 30-year-olds but 27.9% for those over 30, indicating that second-generation migrants are performing better than their parents in terms of pay, or it could point to earnings progression varying between different ethnic groups.
What happens now?
According to a study by PwC, only 5% of large companies have tried to analyse their ethnicity pay gap reporting even though the government is likely to make it a requirement soon. The lack of action could prove problematic for the 95% who aren’t attempting analysis yet, because ethnicity pay gap reporting is likely to be significantly more complex than gender pay gap reporting.
The research found varying reasons for their lack of preparedness although a majority are worried by legal and GDPR restrictions on gathering data, with concerns about the legality of ethnicity data collection and how to go about it.
While revealing the pay gap may initially be painful, not grasping the opportunity could result in long-term reputational damage to the business. As we saw with Gender Pay, companies who left their analysis to the last minute ended up on the back foot and ended up having to submit reports that were less than favourable. If they had completed their analysis sooner, they would have had a better idea of the situation as it stood and had time to make improvements and adjustments before the deadline.
At Innecto, we are currently undertaking Ethnicity Pay and BAME reporting analysis for clients who are keen to ensure they are ahead of the pending legislation. If you would like to find out more about the process involved, please contact me on 020 3457 0894 to discuss further, or email me at sarah.nash@innecto.com.
