Diversity pay gap

Getting to the root of inequality

Is the government's plan to introduce diversity pay reporting flawed?

It is called the ‘black tax,’ according to Kamal Ahmed, the former BBC economics editor whose recent promotion to editorial director makes him one of the most senior black employees in the corporation’s 96-year history.

‘If you have dark skin,’ he says, ‘you have to put in that extra effort to show everyone you’re good enough to be at the top table.’

Mayokun Alonge has heard the term too. ‘I’m exhausted at the prospect of continuing to tell people of colour that they have to work twice as hard to achieve half as much,’ says the founder of The Equal Group, a consultancy devoted to combatting workplace race, gender and disability bias. ‘We hear a lot about diversity and inclusion but many firms seem to promote the idea of diverse and inclusive workplaces without making any tangible strides beyond rhetoric.’

That may be about to change. Buoyed by early success with legislation requiring organisations to publish their annual gender pay comparisons, the Government intends to do the same with pay rates for Caucasian and black, Asian and minority ethnic (BAME) workers. Prime Minister Theresa May has outlined proposals for companies with more than 250 employees to calculate and publish their ethnicity pay gaps. The initial results would be expected to reflect statistics highlighting serious disparities.

This year’s Delivery Diversity report from The Chartered Institute of Management found that just six per cent of the top management jobs in the UK are held by ethnic minorities.

Meanwhile, a UK Government racial disparity audit last year revealed significant differences in life outcomes for BAME people, compared to their Caucasian brethren. Members of the black community were under-represented at senior levels, twice as likely to be unemployed and more likely to work in low-skill jobs.

The more transparent that public companies are about the discrepancies in pay gaps between different groups, the more they are likely to change the ways of pay divides and minimise any ethnic or racial biases

The inequality is perhaps most pronounced in pay rates. While Ahmed is paid a reported £165,000 a year, research shows a sizeable disparity between rates of white workers and those from BAME backgrounds. According to Len Shackleton, professor of economics at the University of Buckingham, all ethnic groups in the UK apart from people of Chinese or Indian backgrounds are paid less than white British workers.

Full-time white British women employees earn more than comparable men in the UK of Pakistani or Bangladeshi heritage. Pakistani immigrant men in the UK, meanwhile, take home 31 per cent less than equivalent white British workers. With the number of ethnic minority people in Britain expected to double from the current eight million over the next two decades and represent between 20 and 30 per cent of the population by 2050, proponents of compulsory race pay comparison data see much merit in seeking to address the problem now.

Charrlotte De’Davis, a British-born businesswoman of Ghanaian descent who is building a chain of health spas under the brand Bardou Beauty and has set up The Bardou Foundation to benefit underprivileged girls around the world, welcomes the pay disclosure initiative.

She explains: ‘The more transparent that public companies are about the discrepancies in pay gaps between different groups, the more they are likely to change the ways of pay divides and minimise any ethnic or racial biases. The UK’s gender transparency regulation has publicly created greater pressure from companies’ employees, competitors and media and it should be possible to do something similar.’

Patryk Strojny, an associate partner at consultants McKinsey and a Bardou Foundation trustee, is also a supporter of the proposal, citing research showing that ethnic minority workers in London’s public sector face a pay gap of up to 37 per cent. ‘I expect a similar gap difference in the private sector and it is critical to be transparent about it and raise public awareness,’ he says.

Ayo Akande, co-founder of Connect4Better, a non-profit organisation committed to tackling barriers to Britain’s black community, also feels it is time for action to be stepped up.

‘There have been numerous studies and research papers produced on the issues facing the Black community in the UK,’ he says. ‘And yet it feels as though there has been very little tangible and visible change. In order for the black community to fully thrive and maximise their full potential, there must be more than lip service to the diversity agenda.’

However, ethnic inequality is a highly-complex issue with many discrepancies between groups of different heritage. Shackleton, who recently wrote about the problem for the Institute of Economic Affairs, points out that UK women of Bangladeshi heritage earn more than comparable Bangladeshi men, while black African British women outpace the earnings of white British women by 21 per cent. There are differences by class, caste, gender, national heritage and religion, with British-based Hindu Indians earning considerably more than British-based Muslims.

Tracking and reporting is only the start, this mandate must be followed by clear direction from the government for companies to implement sustainable solutions to redress the balance of pay within poor-performing organisations

Then there are sizeable disparities according to disability, health status, sexual orientation and even height and perceived attractiveness. The Office for National Statistics currently recognises the existence of 18 ethnic groups in the UK. However, Shackleton views this as a major understatement, saying the number could easily be as high as 100. The causes of pay inequalities between ethnic groups are also multi-faceted, with the 2017 racial disparity audit blaming a BAME skills shortage, a lack of visible role model guidance, low confidence, inappropriate mindsets and workplace discrimination.

Public sceptics of May’s planned ethnic pay comparison disclosure requirements tend to fall into two camps: those who believe the move is just the start of what needs to be a thorough cultural and attitudinal overhaul and those who are implacably opposed, fearing ‘shouty’ politics and a pointless blame game. Alonge is firmly in the first group. ‘A mandate by the Government for companies to report their ethnicity pay gap statistics is an initial step in what can be seen as a long-distance relay race,’ he says. ‘Tracking and reporting is only the start, this mandate must be followed by clear direction from the Government for companies to implement sustainable solutions to redress the balance of pay within poor-performing organisations.’

Reporting in isolation, he argues, also fails to highlight the intersections of issues around ethnicity with those around gender, sexuality and disability, such as a case of a black women with a disability within the workplace. ‘Pay is also just one indicator of inequality,’ he states. ‘There are huge disparities in access to opportunities, progression and even treatment within the workplace. What the Government really needs to get to grips with is a multi-faceted diversity and inclusion problem.’

Sarah Stimson, founder and chief executive of laddertalent, a new people development and diversity consultancy, also believes that, while ethnic pay gap reporting will throw diversity into stark focus for some organisations, it must only be the beginning of a comprehensive programme to tackle the problem. ‘Reporting the figures will only really make a difference to BAME employees if organisations strive to be more inclusive through their recruitment, promotion, and management,’ she states. ‘Employers need a practical plan of action to address the gap which includes evaluating the current state of their diversity and establishing truly inclusive working practices.’

There are some initiatives already in place. Peter Timberlake, head of communications at the Financial Reporting Council, points out that the new revised UK Corporate Governance Code emphasises the Board’s responsibility for workforce policies and practices which reinforce a healthy company culture. This is complemented by the nomination committee’s role in succession planning, which develops a diverse pipeline, and the remuneration committee’s responsibility for aligning rewards with culture and taking workforce pay into account when setting director remuneration. The FRC itself also now publishes research and information tracking the levels of reporting on diversity that FTSE350 companies include in their annual reports.

Last year, Business in the Community (BITC) launched its Best Employers for Race listing, following a recommendation from the Government-backed McGregor-Smith Review of Race in the Workplace. To be considered, employers must demonstrate they are putting leadership on race in place within their organisation, creating inclusive workplace cultures and taking action on leadership, progression and recruitment. They must also show how their policies are positively impacting BAME employees within their organisations.

Sandra Kerr, race equality director at the BITC, argues that, while the annual listing is important recognition for organisations acting on workplace race equality, the greater benefit is the access it gives them to the diverse talent available to help them successfully compete.

Carmen Watson, chairwoman of temporary staff recruitment agency Pertemps, one of 70 firms in this year’s listing, is a firm believer in such transparent public initiatives. She states: ‘Action is the only way to create lasting impact and to remove persistent barriers to ethnic minority recruitment and progression.’ Other initiatives include the ‘Diversity Pledge’, developed by The Mayor’s Fund for London, committing participating organisations to working in partnership to drive sustainable change, practicing internal transparency, encouraging peer-to-peer mentoring and providing access to work experience and apprenticeship opportunities. Twenty major employers, from Network Rail to bus and rail group Stagecoach have signed up so far.

We need not token diversity that considers only arbitrary proxies but true diversity which includes those with different life experiences and heritages

Alonge sees action starting from the top, with a clear need for greater levels of diversity at strategic and decision-making levels. ‘We need not token diversity that considers only arbitrary proxies,’ he says, ‘but true diversity which includes those with different life experiences and heritages.’ Shackleton, however, is definitely in the second camp. ‘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,’ he states.

‘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 differences. And brighter management 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.’

He fears a ‘blunderbuss naming and shaming approach, that will open up a ‘Pandora’s Box’ where competing identities will demand actions that ‘can never be satisfied unless every ethnic background has the same aptitudes, tastes, family responsibilities, health status, religion and even the same looks’. ‘I honestly don’t think Mrs May or most of her acquiescent colleagues really understand what they are doing,’ he concludes.

With many commentators expecting the Government to press ahead with what ostensibly looks like a crowd-pleasing initiative, the focus turns to the detail. Like measurement of many entities that don’t lend themselves precisely to the task, the proof of this particular pudding is likely to be in the metrics and comparison terms used. This is where the going will get tough and actions will be easy to criticise.

But if the new actions even start to quantify the dimensions of the ‘black tax,’ in theory, at least, that should provide a target to be whittled away at. For diversity and sustainability staff at mid-size to large organisations, this is a subject that will only grow in importance in the coming years.