Black and Asian workers are being hit with a “pay penalty” totalling up to £3.2bn every year because of their ethnic background, according to a major study.
The analysis suggested black, Indian, Pakistani and Bangladeshi employees earn less than white colleagues for doing the same work.
It shifts the debate because differences in income between white people and other groups are often thought to be driven by ethnic minorities doing lower skilled, worse-paid work, rather than being paid less for comparable positions.
The thinktank’s calculation took account of differences in average qualification levels and job types between different ethnic groups, revealing a gap of as much as £3.90 an hour in pay rates.
Kathleen Henehan, research and policy analyst at the foundation, said: “Black, Asian and minority ethnic workers have made important gains in the labour market in recent years. A record number of young BAME workers have degrees, and a record number are in work.
“However, despite this welcome progress, many of Britain’s 1.6 million black, Asian and ethnic minority workers face significant disadvantages in the workplace. Black and ethnic minority workers still suffer significant pay penalties compared to white men and women doing the same types of jobs, and are collectively losing out on £3.2bn a year.”
Having a university degree did not allow ethnic minority workers to sidestep the problem.
The biggest impact was on black male graduates, with an average penalty of £3.90 an hour, 17 per cent less that white peers, while Pakistani and Bangladeshi male graduates earned an average £2.67 less an hour, or 12 per cent less.
Among female graduate workers, black women face the biggest pay penalty of £1.62 an hour, or 9 per cent less.
Worst affected among non-graduates were Pakistani and Bangladeshi men, who earned £1.91 an hour, 14 per cent less than white peers, while black male non-graduates faced a pay penalty of £1.31, 9 per cent.
Pay penalties for female non-graduates, while lower, were still significant at 55p an hour for Bangladeshi and Pakistani women, 5 per cent, 61p for black women, 6 per cent, and 44p for Indian women, 4 per cent.
The foundation did note that BAME workers have long earned less, on average, than white male workers, and that these “pay gaps” are in part due to differences in workers’ qualification levels and the types of jobs they do.
But it said that the pay penalty calculation took into account factors such as a worker’s occupation, contract type, industry, education level and degree class.
The thinktank said the loss represented “a huge blow to the living standards of those affected”.
Ms Henahan added: “After the successful steps taken to expose and tackle the gender pay gap in 2018, we now need greater accountability on the ethnic pay gap in 2019. The government can make this happen by requiring large firms to report their BAME pay gaps alongside the reporting they’re already doing on gender. The results should give firms an extra incentive to tackle these issues.”
Legislation which came into effect in April this year requires employers with 250 or more employees to publish annual calculations showing how large the pay gap is between their male and female staff.
In the wake of the gender reporting laws, the government also launched a consultation on whether it would also force businesses to disclose disparities between the pay packets of black, Asian and ethnic minority employees and white counterparts.
Announcing the plans, Ms May said: “Every employee deserves the opportunity to progress and fulfil their potential in their chosen field, regardless of which background they are from, but too often ethnic minority employees feel they’re hitting a brick wall when it comes to career progression.
“That’s why I’m delighted to launch the Race at Work Charter, which gives businesses a clear set of actions to work towards in helping to create greater opportunities for ethnic minority employees at work.”
The consultation, which is open until January 2019, will apply to firms with more than 250 employees, in line with mandatory gender pay gap reporting.
An Equality and Human Rights Commission spokesman said: “We know that an ethnicity pay gap exists in multiple sectors and we believe that bringing in mandatory reporting on staff recruitment, retention and promotion by ethnicity would be an important first step in helping to shine a spotlight on the issue, as it has with the gender pay gap.
“Collecting this meaningful data will give employers the insight they need to tackle the underlying causes of inequality and ensure that those from ethnic minorities enjoy a working environment that allows them to reach their full potential.”
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