UCL: Significant wage disparities found between ethnic minorities and white counterparts

Published in the British Journal of Industrial Relations, the research explores the scale of ethnic wage gaps among full-time employees, after accounting for the segregation of white and ethnic minority employees into different types of workplaces.

The report is the first-of-its-kind in Great Britain to show that most of the aggregate wage gap exists within the workplace between white and ethnic minority co-workers as opposed to arising across high and low wage firms.

The research reveals that, on average, male employees from ethnic minority backgrounds earn around 11% less than their observationally equivalent white male co-workers, while for female employees, the difference was an average of around 7%.

Researchers also found that male and female employees from ethnic minority backgrounds are more likely than white employees to feel over-skilled in their role – and are less satisfied than white employees with their earnings.

The findings indicate that employers should put more emphasis on ensuring fairness in pay setting to reduce pay inequality, according to the researchers.

Co-author Professor Alex Bryson (UCL Social Research Institute) said: “Whereas the gender wage gap has been gradually closing in Britain for some time, ethnic wage gaps have not been closing.

“Ours is the first study to show that most of the earnings disparities across ethnic groups in Britain occur within workplaces, rather than across workplaces. This means employers need to do more to ensure employees from ethnic minority groups are treated fairly in the workplace.”

To calculate the findings, the researchers used nationally representative survey data for Great Britain from 1998, 2004 and 2011 that includes detailed information about employees, their co-workers, and the firms that they work for, and took educational qualifications, job type and the characteristics of the firms into account.

Co-author Dr John Forth (Bayes Business School) said: “While there may have been explanations for ethnicity pay gaps across different sectors and careers, this is the first research to show that the problem extends to those with comparative positions within companies.

“The research paper intensifies the need for measures which bring about greater fairness in pay setting within firms.”

The team found that certain initiatives can make a difference to earnings; the study reveals that the average ethnic wage penalty is around one-third smaller in workplaces with a job evaluation scheme compared to workplaces without one – with the ethnic wage penalty also smaller in workplaces with a recognised trade union.

In contrast, the ethnic wage gap was found to be no smaller in workplaces that have voluntarily reviewed relative pay rates by ethnicity than in workplaces that have not.

The researchers highlight that leaving employers voluntarily to review pay rates is unlikely to lead to progress, unless it also leads to changes in how companies set wages.

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