On 25 October 2021, the House of Lords is due to debate the following question for short debate, tabled by Lord Boateng (Labour):

To ask Her Majesty’s Government what assessment they have made of (1) the benefits of mandatory ethnicity pay gap reporting, and (2) the joint call by the Confederation of British Industry, the Trades Union Congress, and the Equality and Human Rights Commission, for the introduction of mandatory ethnicity pay gap reporting.

What is the ethnicity pay gap in the UK?

The Office for National Statistics (ONS) reports on the ethnicity pay gap each year. It is calculated as the difference between the median hourly earnings of white or white British employees (the reference group) and of other ethnic groups, as a proportion of average hourly earnings of the reference group.

The most recent publication from the ONS on the ethnicity pay gap found that:

  • The pay gap between white and ethnic minority employees has narrowed to its smallest level since 2012 in England and Wales.
  • Most of the minority groups analysed continue to earn less than white British employees but, in 2019, those in the Chinese, White Irish, White and Asian, and Indian ethnic groups earned higher hourly pay than white British employees.
  • The ethnicity pay gap is larger for men than women.
  • The ethnicity pay gap for those aged 30 and over is larger than for those aged 16 to 29 years.
  • The ethnicity pay gap differs across regions and is largest in London.

The report highlighted that the median hourly pay for white British employees was £12.40 per hour, and the median hourly pay for employees from an ethnic minority was £12.11 per hour. However, there were wide variances among different ethnic minorities, for example:

  • Pakistani employees on average earned £10.55 per hour (a 16% pay gap)
  • White and Black African employees on average earned £10.57 per hour (a 15% pay gap)
  • Chinese employees earned £15.38 per hour (a -23% pay gap)
  • White Irish employees on average earned £17.55 per hour (a -41% pay gap)

The ONS uses information from the Annual Population Survey (APS), the Annual Survey of Hours and Earnings (ASHE) and the Labour Force Survey (LFS) as the basis of its report. However, the ONS highlights potential issues interpreting each survey; for example, it noted that the ASHE collects only a limited range of personal characteristics regarding individual employees, and the LFS has a relatively small sample.

How is it currently reported?

Currently, companies with over 250 employees must publish their gender pay gap by law. There is no mandatory requirement to publish information on the ethnicity pay gap, but some companies choose to publish it voluntarily.

A study by PwC carried out in September 2020 concluded that the number of companies calculating their ethnicity pay gap has grown significantly in recent years. The study considered the practices of just over 100 employers, and found that:

  • 67% of those companies surveyed are now collecting ethnicity data on their employees, up from 53% in 2018.
  • 23% of those companies surveyed are now calculating their ethnicity pay gap, compared to 5% in 2018.
  •  40% of those organisations that have calculated their ethnicity pay gap have already published it voluntarily.

Of those organisations who do not calculate their ethnicity pay gap, the most common reason was due to a lack of ethnicity data. This lack of data was reportedly caused by GDPR concerns, low response rates, HR system capabilities or unease around questions about race and ethnicity.

What has happened recently?

As part of its report into racial and ethnic disparities in the UK, published in March 2021, the Commission on Race and Ethnic Disparities said that publication of ethnicity pay gaps should continue to be voluntary for employers and that the Government should provide guidance for employers on how to do so.

The Commission said that the current system used to report on the gender pay gap cannot be used for reporting on ethnicity. It said that this was due to “significant statistical and data issues” that would occur changing a binary characteristic, such as male or female, with one that has multiple categories, such as ethnicity. It also raised concerns that, as 437 out of 650 constituencies in the UK are over 90% white, employers in these parts of the country “do not have enough ethnic minorities for the recording sample to be valid”.

Commenting on those employers who do publish their ethnicity pay gap, it went on to recommend that:

All employers that choose to publish their ethnicity pay figures should also publish a diagnosis and action plan to lay out the reasons for and the strategy to improve any disparities.

Responding to the report in June 2021, a joint coalition of the Trades Union Congress, the Confederation of British Industry and the Equality and Human Rights Commission called on the Government to introduce mandatory ethnic pay gap reporting. In a letter addressed to the then Chancellor of the Duchy of Lancaster, Michael Gove, the group said:

Together we’re asking the Government to make it mandatory for employers to report on their ethnicity pay gaps, building on the successful framework already in place for gender. Reporting, done well, can provide a real foundation to better understand and address the factors contributing to pay disparities. To further enable this, we also support the Commission’s recommendation that pay gap data should be supported by a narrative – comprised of key data, relevant findings and actions plans to address race inequalities.

In addition, on 20 September 2021, a debate will be held in the House of Commons on a recent petition to introduce mandatory ethnicity pay gap reporting which reached over 130,000 signatures.

What has the Government said?

In response to a question on whether the Government had considered introducing mandatory ethnicity pay gap reporting, the Parliamentary Under Secretary for the Department of Business, Energy and Industrial Strategy, Lord Callanan said:

The [Commission on Race and Ethnic Disparities] report includes a specific recommendation in relation to ethnicity pay reporting. We welcome the opportunity to consider the Commission’s findings in relation to this issue, and are looking at them in light of the work that has already taken place within government, including the consultation on ethnicity pay reporting. We will be publishing our response to the Commission’s report later this summer.

The Government ran a consultation on ethnicity pay reporting from October 2018 to January 2019. The consultation asked questions such as what information should be reported to allow for meaningful action, and who should be expected to report. On 4 June 2019, the then Parliamentary Under Secretary for the Department for Business, Energy and Industrial Strategy, Lord Henley, said that the consultation received over 300 responses and that the Government would set out next steps in due course. It has not yet published a response to the consultation.

What have commentators said?

Susan Milner, Professor of European Politics and Society at the University of Bath, has said that the argument that there are too few ethnic minority employees in some areas to provide useful data is “misleading at best”. She stated that there are also issues with the current model used to report the gender pay gap; for example, many more women work part-time than men, and part-time working is often lower paid than full-time, which can make reporting “unreliable”. However, she said that the model is not meant to be “a robust statistical tool”, as it is used to provide a snapshot of the composition and pay of a workforce at a given time. She has argued that reporting on the ethnicity pay gap will provide a “similarly imperfect picture” but it is necessary so employers can improve.

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Cover image by Michael Longmire on Unsplash.