Ethnicity Pay Gap

Bell Ribeiro-Addy Excerpts

Monday 20th September 2021 Westminster Hall

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

It is a pleasure to serve under your chairship, Mr Hosie. I thank the Petitions Committee for making the time for this important debate, and the hon. Member for Carshalton and Wallington (Elliot Colburn) for introducing it. I also thank the organisers of the petition. As the hon. Gentleman said, 130,000 people signed it, including 470 from my constituency.

I thank all hon. Members who contributed to the debate. The hon. Member for Coatbridge, Chryston and Bellshill (Steven Bonnar) talked about structural racism and its impact on society. The right hon. Member for Romsey and Southampton North (Caroline Nokes) talked about how reporting will not really happen unless it is made mandatory, and about her work on the Select Committee on how BAME individuals have been affected during the pandemic. That work shows issues of inequality. The hon. Member for Bath (Wera Hobhouse) talked about the effectiveness of mandatory reporting and gender pay gap reporting, and about how that has made a significant difference.

The past 18 months have brought a welcome focus on issues of race and ethnicity in this country and around the world, which is something I am particularly passionate about. In the context of the aftermath of the murder of George Floyd and the rise of the Black Lives Matter protests, we saw the petition take off. I mention that because ethnicity pay disparities do not exist in isolation; they exist within broader structures of racism that affect black and Asian minority people in every part of their lives. I have experienced it myself.

I have previously called for the Government to implement a race equality strategy and an action plan covering areas such as education, health and employment. I feel that would address the structural inequalities that exist. At the centre of that, I believe there must be action to tackle discrimination in the workplace, unequal access to training, finance and opportunities, and the ethnicity pay gap, which brings me specifically to this petition.

The petition calls for the introduction of mandatory ethnicity gap pay reporting. As the Minister will know, this is not a new suggestion or a new demand; people have been calling for it for some time. Can the Minister outline the Government’s proposals to address the suggestion? As the hon. Member for Bath said, the 2018 McGregor-Smith review into race in the workplace said:

“The Government must…legislate to make larger businesses publish their ethnicity data by salary band to show progress.”

We all know that the Government launched a consultation on this issue, which ran from October 2018 to January 2019. I am extremely concerned that we are yet to see anything published about that consultation some two years later. Can the Minister tell us what message that sends to black and ethnic minority people in this country? To me, it comes across that the Government do not particularly care about these individuals, because the consultation has been done and nothing has materialised from it.

I want to talk about issues with mandatory reporting that have been identified and how they can be overcome, but the delay is not about the practicalities of introducing mandatory reporting. Instead, the Government have gone cold on the idea. Despite the prolonged delay, this issue will not simply go away. We cannot settle for voluntary reporting. I hope that the Minister hears loud and clear that voluntary reporting is totally inadequate, and I will tell him why.

Just this week it was reported that only 13 of the largest 100 employers in this country have published their ethnicity pay gaps. As the hon. Member for Bath mentioned, this situation is similar to what happened before mandatory gender pay gap reporting was introduced in 2017. Prior to it becoming mandatory, a voluntary initiative led to only six companies publishing gender pay gap data, yet consultation shows that employers were generally supportive of mandatory reporting because it meant that all organisations would have to use consistent methods and be able to benchmark against each other. In this case too, only mandatory ethnicity pay reporting will deliver meaningful data from a wide range of businesses. This echoes conversations mentioned by hon. Members about the fact that we need to get the data.

A lot of businesses back mandatory reporting and conversations have been had. The CBI has joined the TUC and the Equality and Human Rights Commission in calling on the Government to go beyond the recommendations of the Commission on Race and Ethnic Disparities and bring in mandatory reporting without delay.

[Bell Ribeiro-Addy (Streatham) (Lab)]

My hon. Friend will be aware that, without mandatory ethnicity pay gap reporting, we do not truly know the full scale of the problem. At the moment people say the gap is about 2.3%, but when we look at individual ethnic groups we see there is a gap of 16% for Pakistani groups and 8% for black groups. Does she agree that until this is made mandatory not only will we not know the scale of the problem, but companies will not take steps forward to address these inequalities?

[Abena Oppong-Asare]

I completely agree with my hon. Friend. Unless we get mandatory reporting, we will not know the full scale of this issue. That is shown by the fact that very few organisations, given the opportunity to do the reporting voluntarily, have taken it up. That leads me to something that I will discuss later—the stats that have been collated, which are quite alarming. We need to make reporting mandatory in order to be able to address the issues that are there—the inequalities that exist.

I want to address the report by the Commission on Race and Ethnic Disparities, which called only for voluntary reporting, and some of the practical issues that the Government have highlighted. The commission stated that

“many employers around the country simply do not have enough ethnic minorities for the recording sample to be valid.”

That is something I have heard in this debate, but leading experts in this field—including the Chartered Management Institute and the Chartered Institute of Personnel and Development—have set out practical ways to overcome it. Other concerns, such as the legal basis for collecting ethnicity information or low declaration rates, can simply be overcome with clear guidance from Government. Those practical issues are what the Government have been working on over the past two years, so the information is there for us to be able to do this, rather than kicking the issue into the long grass.

I want to end by saying something about why ethnicity pay gap reporting is so important. We know that, at national level, significant disparities exist between people of different ethnicities, as my hon. Friend the Member for Streatham (Bell Ribeiro-Addy) mentioned. In 2019, the Office for National Statistics found that median hourly pay was £12.49 for white people, £11.50 for black people and just £10.55 for people of Pakistani origin. The ONS study also found that people of Chinese origin earned on average £15.38 an hour and people of Indian origin earned £14.43. That really should lead us to caution against making sweeping statements about ethnic minorities as a whole, but there is clear evidence that people’s race and ethnic background determines how much they earn, and I have seen that at first hand. Sadly, for many people, the colour of their skin, along with their gender and class, determine the opportunities that are open to them. That is something that we really need to change.

I wanted to mention the interaction between race and other characteristics such as gender. A report was done recently by the Fawcett Society, which found that ethnic- minority women are

“almost invisible from positions of power across both public and private sectors”

in the UK. We see that around us. We know that a range of connected factors determine pay disparities. They include age, location and, of course, gender and race. It is for precisely that reason that we need to build up more data on those disparities, as my hon. Friend the Member for Streatham mentioned. Company-specific reporting is important, because it obliges employers to examine their data and to work out why disparities might exist. It does not assume that discrimination takes place, but rather provides information so that employers can make informed decisions to improve recruitment, promotion and pay policies. Without it, we will not be able to see what progress has already been made and where there is more to do.

Let me conclude. To fight discrimination, we must first see it and understand it. The Government have dragged their feet on this issue for far too long. The consensus for mandatory ethnicity pay-gap reporting is broad and the arguments for it are compelling, so I would be grateful if, when the Minister responds to the debate, he would tell us what the Government will do to bring forward legislation to implement this vital measure.

--- Later in debate ---

[Paul Scully]

As I said at the beginning of my response, I am developing that journey covering the last two years’ worth of work if the hon. Lady will remain patient. The hon. Member for Coatbridge, Chryston and Bellshill (Steven Bonnar) talked about racism, and clearly we need to ensure that we tackle racism in all its forms. However, the Commission on Race and Ethnic Disparities found that most of the disparities when tackling ethnicity pay do not have their origins in racism. There are other factors that may be at play, such as geography, class, sex and age. However, whatever the cause of the pay gap, it is essential that we get organisations to tackle this.

[Bell Ribeiro-Addy]

The Minister said the issue is not about racism. He also conceded that the data that has been received is not very clear, because a number of different groups are not actually reporting. How can he be so sure that the issue is not racism when the small amount of data he does have shows there is a difference between the pay of ethnic people and their white counterparts?

[Paul Scully]

I think the hon. Lady is mixing up two things, because the data I talked about was specific to the civil service. It was specifically to make the point that we can read different things out of statistics. What I was quoting about racism is not my view necessarily; it is the view of the report by the Commission on Race and Ethnic Disparities, which was tasked with looking at this and other issues. We are committed to taking action on ethnicity pay reporting, but we want to ensure we are doing the right things to genuinely help move things forward. Determining what it makes sense to report on and what use that data may be put to is key. It is far from straightforward.

The commission’s report and our post-consultation work with businesses and other organisations identify a wide range of technical and data challenges that ethnicity pay reporting brings. First, there is the challenge of statistical robustness. In 2019, the Royal Statistical Society argued for a minimum sample size per category of at least 100 to draw valid conclusions. Its purpose was to ensure that the calculation of a pay-gap statistic would be reasonably reliable when interpreted by non-statisticians, who would not likely be able to appreciate or measure the extent to which the statistic is affected by random chance.

The second challenge, as we have heard by my hon. Friend the Member for Carshalton and Wallington, is anonymity. It should never be possible to identify any individual from ethnicity pay-gap analysis. That means a sample size must be large enough so that it is not possible to link a number of individuals of the same ethnicity to a particular pay band. The third challenge is data collection and business burdens. A study of more than 100 organisations by PwC in August 2020 found that almost 35% did not collect any ethnicity data, with half identifying legal and GDPR requirements as barriers to collecting the data. Among the organisations that did collect data, around half said they would be unable to publish their ethnicity pay data due to poor or insufficient data driven by low response rates.

Fourthly, there is reporting on a binary basis. One way to mitigate low employee declaration rates is to combine all individuals from an ethnic minority background into a single group for reporting purposes. However, such an approach risks masking the significant variations in labour market outcomes between groups and therefore the relevance of any action plan. Finally, there is the challenge of skewed results. Reporting at a more granular level risks results being skewed by particularly large or small pay values because of low numbers of particular ethnic groups. If an employer with 300 people employs black individuals in the same proportion as the wider population—3% of England and Wales’ working population is black according to the Office for National Statistics—then their average pay would be calculated from just 9 individuals, and that assumes 100% declaration rates.

The uneven geographical distribution of specific ethnic groups complicates the issues further. In Wales, only 0.7% of the working-age population is black. It is therefore much harder to produce reliable and actionable statistics from relatively few data points. All this create complex challenges when deciding how best to take forward ethnicity pay reporting, but the Government are determined to take steps to help employers tackle race and ethnic disparities in the workplace. I think we would all agree that key to this endeavour is obtaining a good understanding of the issues that may be driving the disparities and, most importantly, developing meaningful action plans, based on that understanding. The Ruby McGregor-Smith report, the Government’s consultation on ethnicity pay reporting, and the commission’s work all make an important contribution to both the national conversation about race and the Government’s efforts to level up and unite the whole country.

The Government are now considering in detail what we have learned from the consultation on ethnicity and pay, our further work and the commission’s report. We are assessing the next steps for future Government policy, and we will set out a response in due course. Once again, I thank hon. Members who have contributed to the debate. It has been a valuable discussion.