Solving workplace equality will need more than ethnicity pay reporting
Theresa May’s call to make companies report their ethnicity pay gap comes from a good place. It harks back to her 2016 “burning injustices” speech, in which she pledged to tackle social inequality – and suggests that she meant it. It also comes after some success with gender pay gap reporting, which it clearly hopes to emulate.
But it’s worth asking whether it can reproduce this. The government’s race audit last year showed that despite progress in education – especially at university – such success is not replicated in the workplace.
Measuring a problem is the first step towards fixing it, so one can see how “there are racial inequalities in the workplace” has become motivation for measuring pay by ethnicity. But how you measure things is important.
Differences in gender outcomes are comparatively easy to assess. Most people self-define as one of two genders, and these cut across all ages, demographics, and nearly all sectors.
Once you notice, for example, that young men and women see comparatively small differences in pay, but that salaries diverge significantly after the age of 39, you can deduce that something happens to women in their thirties that harms their earning potential.
Categorising ethnicity is more complicated. The Office for National Statistics recommends 18 separate categories, with “white British” capturing around 87 per cent of the population.
Dividing an already small group into 17 sub-groups risks disaggregating the data to the point where it’s hard to establish meaningful patterns. For a company with 50 employees, a single promotion or resignation could have a material effect statistically.
The alternative – imposing a binary distinction between white and BAME employees – risks the opposite. We know that people from different ethnicities face diverse challenges, and conflating them could mask real problems. It would also mean that good representation of one group could disguise deeper underlying discrepancies.
Demographic changes also evolve over time. A young man moving to the UK from, say, South Asia and taking on casual unskilled work will be on low wages, no matter how many qualifications he holds. When, decades later, his daughter becomes a chief executive or thoracic surgeon, she will be classified as high-skilled and in one of the highest salary groups.
But self-definition by ethnicity is elective, for obvious reasons of identity. And in a world where ethnic minority candidates suffer from prejudice, not everyone wants to define that way. Moreover, people from mixed-race backgrounds are offered other categories to choose from. In either case, there is a risk that the stroke of a pen could turn one family’s success story into, statistically speaking, diversity failure.
There are other approaches that might help address structural racial inequalities. Research from the US suggests that when hiring individuals there is often a bias towards conformity to the status quo, but hiring in groups overcomes this.
Why not do the same for promotions? Appointing groups rather than individuals to the next rung on the ladder is likely to inspire recognition of the need for diverse candidates. This would also create a pipeline to the top, and role models for further down. Clearly this would only be suitable for larger companies, but it would be a start.
Designed correctly, and with a structure to enact change, reporting on ethnicity pay gaps may be a useful step towards addressing inequality. But without explaining how it will adjust for complexity, or what companies are supposed to do next, it looks a bit too much like the government has looked at the gender debate and decided that pay gap reporting is an easy fix.
It’s a nice idea to address the very serious challenges May highlighted in her first prime ministerial speech, but it is no silver bullet.