UK: The Great Divide

Last Updated: 9 March 2017
Article by Anjali Raval

With reporting obligations due to come into effect from 6 April 2017, the gender pay gap debate has taken centre stage over the past year. With the UK gender pay gap still sitting at over 18 per cent, it is unsurprising that this has been the focus of political and media attention. The purpose of the regulations is not just to force employers to mechanically calculate their pay and bonus gaps, but also to encourage employers to look inwards to identify why any gaps are arising and what steps can be taken to achieve parity. Considering the business case for closing the gender pay gap is tantamount to the success of this latest government initiative.

But the gender gap is not the only gap which affects our productivity in the UK. A government backed review has found that helping black and minority ethnic (BME) people to progress in their careers at the same rate as their white counterparts could add Ł24bn to the UK economy each year (a boost to GDP of 1.3 per cent).

The report by Baroness McGregor-Smith, who became the first Asian woman to run a FTSE 250 company when she took over at Mitie in 2007, found that people from BME backgrounds were still often disadvantaged at work. Whilst the Baroness acknowledged that this is still in part down to overt race discrimination, she said, for the most part, the differential treatment is actually down to unconscious bias. She also noted that the UK has a structural, historical bias that favours certain individuals.

The review found that employment rates amongst people from BME backgrounds were 12 per cent lower than for white counterparts. It also found that just six per cent reached top-level management positions. But this isn't new. A report by the TUC in February last year identified that staff from all ethnic minority backgrounds, qualified to degree level, faced a 10 per cent pay deficit in comparison to their white counterparts, with the figure rising to 17 per cent for those with A-levels only.

Of course the reasons for the gap are not straightforward. However, Frances O'Grady, TUC General Secretary, stated that "this is not just about education, but about the systemic disadvantages ethnic minority workers face in the UK". A study by the Institute for Social and Economic Research at the University of Essex found British ethnic minority graduates were between five and 15 per cent less likely to be employed six months after graduation than their white peers at the same institutions.

One of the main recommendations of the Baroness' report is legislation to make firms with more than 50 workers publish a breakdown of their workforce by race and by how much they are paid. She suggested that firms should draw up five-year diversity targets and nominate a board member to deliver them. She also noted that she wants to see diversity as part of public procurement guidelines.

Government ministers have been quick to respond in support of the general recommendations of the report but they have ruled out introducing new legislation. Instead, Business Minister, Margot James, has asserted that "the best method is a business-led, voluntary approach and not legislation as a way of bringing about lasting change." This recommendation is not however supported by the history of gender pay gap reporting.

The 2010-2015 coalition government initially decided to introduce gender pay reporting on a voluntary basis, in the "Think, Act, Report" scheme. Whilst 200 firms signed up to the initiative's principles, only a handful actually published their gender pay gap statistics. With pressure mounting on the government, the then Prime Minister, David Cameron, announced that the government would "end the gender pay gap in a generation"; a bold statement and one that he could only dream of achieving if it was specifically legislated for. Here's hoping the new regulations achieve that honourable goal.

But the question is, in light of the gender pay gap experience, can we expect new legislation providing for race/ethnicity pay gap reporting? In the medium term at least it seems likely. By that point, employers will hopefully have developed the infrastructure that will mean that calculating these gaps and reporting on them should not be too much of an onerous task. However, employers should ideally be taking informal steps to assess their race/ethnicity pay gap now and should start to consider initiatives that they might take to close the gap within their workforce. That way, they can be ahead of the curve if and when race/ethnicity pay gap reporting obligations do come into force.

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