Labour Market

Publishing ethnic minority pay data will only create new injustices


Theresa May’s intention to introduce monitoring of ethnic pay gaps is likely to add to the rancorous identity politics already stirred up by the gender pay debate.


It is well established that there are big variations in hourly pay between different ethnic groups. Most are paid less than white British workers, with the exception of people of Indian or Chinese heritage. Male full-time workers from Pakistani and Bangladeshi backgrounds earn less on average than white British women working full-time.


There are also differences between native-born minorities and immigrants. British-born Pakistani heritage men, for example, face a pay gap of 19 per cent in relation to white British men, while Pakistani immigrant men experience a 31 per cent disadvantage. But to add to the complications, the picture for ethnic minority women is sometimes counter-intuitive. Bangladeshi heritage women earn more than Bangladeshi men and Black African British women earn 21 per cent more than white British women.


Some ethnic groups face further disadvantage in that their employment rates are lower, and their unemployment rates higher, than the white British population. And they may be under-represented in elite jobs.


But will monitoring individual companies add much to our understanding? For one thing, the numbers of any single group in many organisations will be far too small to draw any valid conclusions. The ONS currently distinguishes 18 ethnic groups, although this number is probably insufficient to represent the real diversity in the UK workforce, where definable and sizeable groups with separate lifestyles and cultures probably exceed 100. And, given the differences between the behaviour (and treatment) of women from different ethnic communities, the relevant categories need to be doubled.


In practice disparate groups will inevitably be linked together in broad categories such as ‘black African’ which will encompass doctors from Zimbabwe and unskilled labourers from Somalia. This will, on past experience, be greatly resented by those lumped together in this way – already large numbers of people are unhappy at returning voluntary surveys which ask people to classify themselves. One of the fastest-growing categories, incidentally, is ‘mixed’ – a testimony to the growing integration of many second-generation immigrants.


Often even apparently close matches – people of Indian heritage for example – will conceal more than they reveal. There are differences, for example, by religion: those with a Hindu Indian heritage tend to earn much more than those from a Muslim background.


While we’re at it, the academic literature shows significant pay differentials by disability and health status, by sexual orientation, and even by height and perceived attractiveness. Try sorting that lot out.


Of course, knowing the existence and size of these pay gaps is only a first step to understanding. We need to analyse the data to see whether the apparent disadvantage is explained by such factors as occupation, age, experience, unsocial hours and the myriad other influences on pay before we can start suggesting sensible policy interventions.


That won’t happen, though. Individual firms, organisations or government departments will be denounced on the basis of crude statistical generalisations, as has happened with gender pay differentials. And brighter managements will attempt to dodge the bullet by devices such as outsourcing low-paid work done by minority workers or recruiting older rather than younger employees – measures which will improve their apparent ‘performance’. This is what economists call ‘Goodhart’s Law’ – focusing on an indicator leads to behavioural changes which means the indicator no longer shows what you think it shows.


This approach to improving social justice is no doubt conceived with the best intentions. But it will open up a Pandora’s Box where competing identities will demand action, demands which can never be satisfied unless every person, from every ethnic background, has the same schooling, the same qualifications, the same aptitudes, the same tastes, the same family responsibilities, the same health status, the same religion, even the same looks. I honestly don’t think Mrs May, or most of her acquiescent colleagues, really understand what they are doing.


Where discrimination exists, it is against the law and should be dealt with accordingly. But patterns of advantage and disadvantage are much subtler issues and deserve careful analysis rather than this blunderbuss ‘naming and shaming’ approach.


Editorial and Research Fellow

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.


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