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As companies with more than 250 employees submit their gender pay figures to the government for the second year in a row, it’s become an increasingly accepted way to combat the gender pay gap. Similar plans are being considered for ethnicity pay. This is because the UK government’s Race Disparity Audit has showed widely varying outcomes in areas including education, employment, health and criminal justice between Britain’s white and ethnic minority populations.

Mandatory pay reporting could help highlight the ethnicity pay gap in much the same way that gender pay gap reporting does. The idea is that companies will be publicly shamed into taking more concrete action to reduce their pay disparities.

Ethnicity pay gap reporting would be a welcome move. Government statistics show there are substantial pay gaps between white and non-white groups in the UK. On average, employees from Pakistani, Bangladeshi, black and other ethnic groups earn less than white employees.

Linked to this, the poverty rate is twice as high for BAME groups compared to white groups within the UK. Research indicates that poverty rates are about 50% for Bangladeshi groups, 47% for Pakistani groups, 40% for black groups, 35% for Chinese groups, and 25% for Indian groups, compared with 20% for white groups in the UK.

Proportion of people in poverty by ethnicity. Joseph Rowntree Foundation

Seeing as work is a crucial way out of poverty, it is important to recognise where there is discrimination in employment and how pay reporting can help this. As with the gender pay gap, it is illegal to pay someone less for doing the same job based on their ethnicity. Nonetheless, research shows the ethnicity pay gap is growing between BAME and white men who do broadly similar work (for women, the picture is more varied). This is unacceptable and it would be beneficial to know where this takes place.

Other data shows that, despite increasing educational gains made by people from non-white backgrounds, many are overqualified for the jobs that they do – 40% of African and 39% of Bangladeshi employees were overqualified for their roles, compared with 25% of white workers. BAME workers often report not being given pay rises when their white colleagues get them or being passed over for promotion. Pay reporting would shine a light on this.

Low pay and poverty

One very important driver for the disproportionately high poverty rates among some ethnic groups is the concentration of BAME workers in low-paid work. BAME groups are more likely to work in low-paid sectors such as caring, catering, hairdressing and retail jobs – these are also occupations with limited progression opportunities. It is this lack of movement out of low-paid work that increases the risk of poverty among ethnic groups.

Ethnic pay gap reporting plays an important role in highlighting the systemic racism at play here. In the same way that the disparity between men and women’s pay in big airlines is attributed to the fact that women are less likely to be higher-paid pilots than men, it’s important to shine a light on the way certain groups get pushed or sidelined into certain, lower-paid professions. Especially when being limited to low-paid roles feeds the poverty levels that are disproportionately high among BAME groups. The vicious cycle of poverty means that lifelong barriers and troubles are passed on from one generation to the next.

As well as the moral reasons for wanting to eradicate poverty and inequality from our society, there is also an economic incentive. The government-commissioned McGregor-Smith review of race in the workplace estimates that having full representation of BAME workers in the labour market would both help reduce poverty across the country significantly and benefit the UK economy by £24 billion a year. That’s about 1.3% of GDP. This is because the review recognises how a chunk of the BAME workers could contribute more to the economy and are being held back from achieving their full potential. Too many companies, it says, only have black and minority ethnic representation in the lowest-paid positions.

The UK government has continuously vowed to tackle racial inequalities. There are myriad ways that this must be done. Research particularly recommends that policies which tackle BAME workers being limited to low-paying positions be encouraged. This includes monitoring recruitment, retention and career progression of different ethnicities – all of which ethnicity pay gap reporting feeds into.

Of course, this reporting won’t be a quick fix. But it can play an important role in highlighting the discrimination faced by BAME workers and how this takes place in different industries, as we strive to achieve a fairer workplace and society.

The Conversation

Tolu Olarewaju does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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