EDI Nation: The growth of Equality, Diversity and Inclusion bureaucracy and its costs
17 October 2025
SUGGESTED
Economic Theory
25 September 2025
Labour Market
Society and Culture
https://iea.org.uk/wp-content/uploads/2025/10/IEA_DP142_EDI-Nation_v2.pdf
In the early 2010s, a number of campaign groups made the case for the introduction of what they called a ‘living wage’, with rates substantially above the statutory national minimum wage.
These groups typically argued that the introduction of such a living wage would more than pay for itself: it would not just be a matter of social justice and fairness, but also, simply, a shrewd business strategy. While they acknowledged that there would be a cost to employers, they argued that that cost would be more than outweighed by the resulting productivity improvements. A better-paid workforce, the argument went, would be a more motivated and productive workforce. It would be a workforce with higher staff retention rates, lower rates of absenteeism, fewer workplace disputes, etc.
All of this is undoubtedly often true. But there was nonetheless a major flaw in these campaigners’ arguments. If wage increases pay for themselves – why do businesses have to be coerced or pressurised into it? We do not usually have to coerce or pressurise businesses to do things that are profitable and good for them. To the extent that wage increases really do pay for themselves, we can reasonably assume that companies will have figured this out already, and that these effects are already reflected in current wage rates.
Making this assumption does not require us to believe in a strong version of the ‘efficient market hypothesis’. It only requires us to believe that businesspeople usually know more about their business than social justice campaigners, who have no connection to the company, and no skin in the game. If youtruly knew how to make companies more profitable, you would become a management consultant, not a social activist. You would sell your expertise to willing buyers, not hector companies on social media.
After being quite prominent for a while, these living wage campaigns then ran out of steam in the second half of the 2010s. But they were quickly replaced by a new set of initiatives that use a rather similar logic. Since the 2010s, Britain has seen explosive growth in the ‘Equality, Diversity and Inclusion’ (EDI) sector (also sometimes called the ‘Diversity, Equity and Inclusion’ (DEI) sector). This is true whether we narrowly define that sector as people who literally have the words ‘Equality’, ‘Diversity’ and/or ‘Inclusion’ in their job titles, or whether we define it more broadly and include EDI/DEI-related roles within HR departments.
Like living wage campaigners did before them, proponents of EDI/DEI argue that these initiatives more than pay for themselves. They are presented as not just a matter of social justice and fairness, but also, simply, a wise business strategy. Yes, equality officers and diversity managers need to be paid for. But, the argument goes, they also give rise to productivity improvements which easily outweigh their costs. A more diverse workforce is a more productive workforce, and greater diversity does not just happen on its own: it needs active management. Companies need strategies to actively seek out people from hitherto underrepresented groups, and they need to make an active effort to make themselves more welcoming to them.
As with the living wage campaign, there is undoubtedly some truth in this. Britain has, in lots of respects, become a much more diverse society over the course of this century alone, let alone compared to the previous one, and some social norms have changed radically alongside. It would be strange if workplace norms, workplace practices and workplace management were completely unaffected by this. To the extent that the growth in the EDI/DEI sector is simply a voluntary phenomenon, i.e. a business strategy that companies adopt to deal with the requirements of a diverse society, it is unproblematic.
But as Alex Morton shows in this Discussion Paper, only a small proportion of the explosion in the EDI sector can be explained by voluntary behaviour like this. In the main, EDI is a sector which owes its existence, directly or indirectly, to government legislation (as well as activist pressure).
At the end of the day, EDI is based on a political ideology: an ideology which one can agree or disagree with. Like proponents of any other political ideology, proponents of EDI should, of course, have every right to promote their ideas. But they should not have a right to force that ideology on other people. Like other participants in the marketplace of ideas, they should have to rely on voluntary persuasion.
This paper is not an exercise in ‘woke-bashing’. We hope that it will not just appeal to readers who are hostile to EDI from the outset, because they see it as pointless virtue-signalling. We hope that it will also appeal to readers who have some sympathy with the EDI approach, but who accept the case for pluralism and decentralised decision making in this area. Other things equal, of course a company where people from a variety of different backgrounds can constructively work together is going to be more successful than a company where that is, for whatever reason, not the case. But how is this goal best achieved, and how important is this compared to other goals? The answers will differ from organisation to organisation, and there is no reason to believe that legislators or activists are better placed to come up with the right answers than the owners and/or the management. As so often, an open-ended market discovery process will almost certainly produce better outcomes than a politically imposed agenda.
The views expressed in this discussion paper are, as in all IEA publications, those of the author alone and not those of the Institute (which has no corporate view), its managing trustees, Academic Advisory Council members or senior staff. With some exceptions, such as with the publication of lectures, IEA Discussion Papers are blind peer-reviewed by academics or researchers who are experts in the field.
by Dr Kristian Niemietz
Editorial Director
IEA_DP142_EDI Nation_v2 (1)
Foreword
In the early 2010s, a number of campaign groups made the case for the introduction of what they called a ‘living wage’, with rates substantially above the statutory national minimum wage.
These groups typically argued that the introduction of such a living wage would more than pay for itself: it would not just be a matter of social justice and fairness, but also, simply, a shrewd business strategy. While they acknowledged that there would be a cost to employers, they argued that that cost would be more than outweighed by the resulting productivity improvements. A better-paid workforce, the argument went, would be a more motivated and productive workforce. It would be a workforce with higher staff retention rates, lower rates of absenteeism, fewer workplace disputes, etc.
All of this is undoubtedly often true. But there was nonetheless a major flaw in these campaigners’ arguments. If wage increases pay for themselves – why do businesses have to be coerced or pressurised into it? We do not usually have to coerce or pressurise businesses to do things that are profitable and good for them. To the extent that wage increases really do pay for themselves, we can reasonably assume that companies will have figured this out already, and that these effects are already reflected in current wage rates.
Making this assumption does not require us to believe in a strong version of the ‘efficient market hypothesis’. It only requires us to believe that businesspeople usually know more about their business than social justice campaigners, who have no connection to the company, and no skin in the game. If youtruly knew how to make companies more profitable, you would become a management consultant, not a social activist. You would sell your expertise to willing buyers, not hector companies on social media.
After being quite prominent for a while, these living wage campaigns then ran out of steam in the second half of the 2010s. But they were quickly replaced by a new set of initiatives that use a rather similar logic. Since the 2010s, Britain has seen explosive growth in the ‘Equality, Diversity and Inclusion’ (EDI) sector (also sometimes called the ‘Diversity, Equity and Inclusion’ (DEI) sector). This is true whether we narrowly define that sector as people who literally have the words ‘Equality’, ‘Diversity’ and/or ‘Inclusion’ in their job titles, or whether we define it more broadly and include EDI/DEI-related roles within HR departments.
Like living wage campaigners did before them, proponents of EDI/DEI argue that these initiatives more than pay for themselves. They are presented as not just a matter of social justice and fairness, but also, simply, a wise business strategy. Yes, equality officers and diversity managers need to be paid for. But, the argument goes, they also give rise to productivity improvements which easily outweigh their costs. A more diverse workforce is a more productive workforce, and greater diversity does not just happen on its own: it needs active management. Companies need strategies to actively seek out people from hitherto underrepresented groups, and they need to make an active effort to make themselves more welcoming to them.
As with the living wage campaign, there is undoubtedly some truth in this. Britain has, in lots of respects, become a much more diverse society over the course of this century alone, let alone compared to the previous one, and some social norms have changed radically alongside. It would be strange if workplace norms, workplace practices and workplace management were completely unaffected by this. To the extent that the growth in the EDI/DEI sector is simply a voluntary phenomenon, i.e. a business strategy that companies adopt to deal with the requirements of a diverse society, it is unproblematic.
But as Alex Morton shows in this Discussion Paper, only a small proportion of the explosion in the EDI sector can be explained by voluntary behaviour like this. In the main, EDI is a sector which owes its existence, directly or indirectly, to government legislation (as well as activist pressure).
At the end of the day, EDI is based on a political ideology: an ideology which one can agree or disagree with. Like proponents of any other political ideology, proponents of EDI should, of course, have every right to promote their ideas. But they should not have a right to force that ideology on other people. Like other participants in the marketplace of ideas, they should have to rely on voluntary persuasion.
This paper is not an exercise in ‘woke-bashing’. We hope that it will not just appeal to readers who are hostile to EDI from the outset, because they see it as pointless virtue-signalling. We hope that it will also appeal to readers who have some sympathy with the EDI approach, but who accept the case for pluralism and decentralised decision making in this area. Other things equal, of course a company where people from a variety of different backgrounds can constructively work together is going to be more successful than a company where that is, for whatever reason, not the case. But how is this goal best achieved, and how important is this compared to other goals? The answers will differ from organisation to organisation, and there is no reason to believe that legislators or activists are better placed to come up with the right answers than the owners and/or the management. As so often, an open-ended market discovery process will almost certainly produce better outcomes than a politically imposed agenda.
The views expressed in this discussion paper are, as in all IEA publications, those of the author alone and not those of the Institute (which has no corporate view), its managing trustees, Academic Advisory Council members or senior staff. With some exceptions, such as with the publication of lectures, IEA Discussion Papers are blind peer-reviewed by academics or researchers who are experts in the field.
by Dr Kristian Niemietz
Editorial Director
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