In the recent Deaton Review of Inequalities (the Review), the Institute of Fiscal Studies (IFS) considered ethnic inequalities in the UK and found that, despite substantial improvements in terms of educational performance and rates of employment, a clear ethnic pay gap remains. The IFS also emphasised the disparities in experience between different ethnic minority groups, highlighting the danger of categorising all ethnic minorities as one group. For example, while in terms of median weekly earnings in 2019, Pakistani and Bangladeshi men were respectively paid 22% and 42% less than their White counterparts, Indian men were paid 13% more. In this article, we take a closer look at the Review's wider findings and consider how employers can contribute to reducing the ethnic pay gap and promoting the inclusion of a diverse range of ethnicities. This includes collecting and analysing the relevant data as well as being alert to and embracing employees' individual differences.

The Review's findings

Focusing on the Review's assessment of educational performance, employment and salary rates, the IFS concluded:

• Educational performance

Educational performance across most ethnic minority groups has rapidly improved. For example, the attainment gap between Bangladeshi students and White British students decreased by 3% from 2004 to 2019. Further, students from all ethnic minority groups are more likely to attend university than their White counterparts. While disparities unfortunately still exist for ethnic minority students once at university, these findings are nonetheless encouraging.

• Employment rates

In general terms, the ethnic employment gap has also substantially reduced (and almost closed) in the last 20 years. In the mid-1990s, Bangladeshi and Pakistani men were respectively 18% and 29% less likely to be employed than White British males. Today, the figure is 2-3%. That said, in 2019, Black Caribbean men were still 5% less likely than their White counterparts and 10% less likely than Other White and Indian men to be in employment. Further, female employment rates remain much more disparate, with Bangladeshi and Pakistani women being 30% less likely to be employed than their White female counterparts.

• Salary rates

Unfortunately, improvements in educational performance and employment rates have not generally translated into better pay for ethnic minority employees. While the average income for Indian employees recently surpassed those of White British employees and median incomes for Chinese employees have become increasingly comparable to White British incomes, Black Caribbean, Black African, Bangladeshi and Pakistani median incomes remain significantly lower (17%, 22%, 29% and 36% lower, respectively).

Professor Heidi Safia Mirza, who co-authored a chapter in the Review, summarised the picture as "neither universally positive nor universally gloomy". She stated that "most ethnic minority groups in the UK are doing better than they were and are doing particularly well in education. On the other hand, most continue to earn less than their White British counterparts, and all earn less on average than we would expect given their education, background and occupation".

Ethnic pay gap reporting

A number of complex factors contribute to the persistence of ethnic pay inequalities in the UK. An example of such, as pointed out by Professor Mirza, is discrimination in the labour market.

As we know, discriminatory behaviour and practices can exist in the workplace in a variety of forms. For example, hiring one prospective employee over another because of their race or, as we discussed in a recent article, mocking an employee's national accent, may equate to discrimination under the Equality Act 2010.

More specifically in relation to salary, discrimination may exist where an ethnic minority employee is paid less than their White British counterpart for the same kind of work. This kind of discrimination is more likely to persist where there is a lack of transparency surrounding the criteria and decision-making processes used to regulate pay. While there is currently no legal requirement for such transparency, employers could still collate, analyse and take action on ethnic pay gap data. This is a crucial step in identifying any potentially discriminatory pay practices, which can then be rectified in order to ultimately improve diversity and inclusion.

As highlighted by the Review, people from different ethnic minorities have different experiences and are therefore impacted by workplace policies and procedures in varying ways. Limiting the definition of ethnic minorities to a small number of categories – for example, Black, Asian and African – is unhelpful and may skew or obscure ethnic pay gap differences. Where a sufficient dataset exists, employers should utilise a reporting methodology that appropriately identifies different ethnic groups. The Office for National Statistics has published an example list, recommended for use in the UK, which includes the following categories: English/Welsh/Scottish/Northern Irish/British, Gypsy or Irish Traveller, White and Black Caribbean, White and Asian, Asian or Asian British, Indian, Pakistani, Bangladeshi, Chinese, Black or Black British, African, Caribbean and Arab.

Beyond the data: culture

Beyond ethnic pay gap reporting, employers can conduct a review of their workplace culture to determine the extent to which they genuinely encourage and embrace individual ethnicities and cultures, including in relation to race and religion. In particular, the absence of inclusive workplace cultures correlates to low levels of ethnic minority retention and progression. In turn, this contributes to the persistence of ethnic inequalities in the UK labour market.

Research from Pearn Kandola recently revealed that 38% of Hindu employees reported having had an annual leave request to celebrate a religious festival rejected without good reason. As a result, these employees reported feeling isolated and lonely. A particularly concerning finding from the research indicated that, whilst some respondents admitted to not wanting to express their religious identity at work, others wanted to but were concerned about the consequences of doing so. Pearn Kandola remarked that these findings highlight why we should not "allow diversity at the top to distract us from a lack of inclusion and representation overall". They went on to say this further demonstrates that "organisations still have progress to make in creating truly inclusive cultures". To improve on this, employers could seek to raise awareness of different religions and cultural practices (and any related celebrations) by way of awareness sessions and training. Additionally, all employees, though especially those tasked with decision-making and management roles, should be encouraged to view all aspects of work through a diversity and inclusion lens. This could include supporting managers to be aware of and to understand different team member's requests for annual leave and flexible working, for example.

Several businesses such as Deloitte, Grant Thornton and Spotify, have introduced policies which allow employees to choose whether to work on bank holidays, such as Christmas Day, or whether to take the time off on another date instead. As remarked by Jackie Henry, managing partner at Deloitte, this enables employees "to take public holiday leave on the dates which are most meaningful to them". Such policies demonstrate a clear commitment to respecting employees' cultures, religions and personal preferences and, in turn, are likely to boost the engagement and retention of ethnic minority employees.

The bottom line

There are a number of ways in which employers can create a genuinely diverse and inclusive culture in their organisation. Howsoever achieved, the bottom line is that the goal should be a workplace environment in which all employees, regardless of race, religion, gender or any other personal characteristic, feel safe to speak their mind and express themselves, without fear of repercussions. This will facilitate a sense of belonging which will, in turn, enable employees to confidently bring their own diverse ideas to the table.

Additionally, employers should avoid lumping ethnic minority groups together. They should seek to understand and respect all employees' individual differences. Embracing individuality in this way can help businesses to challenge traditional ways of thinking and enable workstreams to be approached from a number of diverse angles, thereby boosting innovation.

Conclusion

Notwithstanding some clear progress, the IFS's findings outline continued ethnic disparities in the UK labour market. While ethnic pay gap reporting is undoubtedly important, the inclusion of different cultures is equally so. To retain ethnic minority talent and to ensure its progression, it is essential that employers create an environment in which employees feel free to express their racial, religious and cultural identity. Employers who strive to create genuinely diverse and inclusive cultures will be rewarded with a workforce that is more motivated, innovative and loyal as a result.