Ethnicity Pay Gap

Stewart Hosie Excerpts
Monday 20th September 2021

(2 years, 6 months ago)

Westminster Hall
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Stewart Hosie Portrait Stewart Hosie (in the Chair)
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Before we begin, may I encourage hon. Members to wear masks when they are not speaking? This is in line with the current Government guidance and that of the House of Commons Commission. Please also give one another and members of staff space when seated and when entering and leaving the room.

Elliot Colburn Portrait Elliot Colburn (Carshalton and Wallington) (Con)
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I beg to move,

That this House has considered e-petition 300105, relating to ethnicity pay gap reporting.

It is a pleasure to serve under your chairmanship, Mr Hosie. I thank all right hon. and hon. Members for expressing an interest in this afternoon’s Petitions Committee debate. The e-petition is entitled “Introduce Mandatory Ethnicity Pay Gap Reporting”. Let me begin with the text of this petition, which states:

“Much like the existing mandatory requirement for employers with 250 or more employees must publish their gender pay gap. We call upon the government to introduce the ethnicity pay gap reporting. To shine a light on race/ethnicity based inequality in the workplace so that they can be addressed.

Currently there is a lack of data available in gauging the ethnicity pay gap in the workplace. Introducing these measures will allow employers to be held accountable in closing the gap where there is disparity. In order to achieve a fairer workplace publishing this data is one of the next steps to knowing how extensive the issues are from a race and ethnicity perspective and not just through the lens of gender.”

The petition closed with 130,567 signatures, including 355 from my Carshalton and Wallington constituency. At the outset of today’s debate, I thank the petition creator for taking the time to talk to me about why they started the petition. I also thank organisations such as NatWest, Lloyds and Barclays, which took the time to speak to me about their experience of ethnicity pay gap reporting in their own organisations—I will talk about that later. I also thank the independent statistician Nigel Marriott for his very helpful briefing note and his thoughts, which Members can view on his website.

There have been many calls in support of ethnicity pay gap reporting, and that request is not something new or born out of this petition; it has been around for some time. Reporting in March 2021, the Commission on Race and Ethnic Disparities also found that pay gap reporting is a potentially useful tool. But if we cast our minds back to 2018, when my right hon. Friend the Member for Maidenhead (Mrs May) was Prime Minister, she launched a consultation on this issue, and the stated aim of the consultation at that time was to help employers to identify barriers and enable a fairer and more diverse workplace. That move was welcomed at the time by both the CBI and the Equality and Human Rights Commission, along with businesses, charities, academics and others.

All of these, including the petition creator and those who briefed me prior to today’s debate, made the case that ethnicity pay gap reporting, much like gender pay gap reporting, could help businesses to understand their workforce better, identify barriers to equality and create action plans to tackle those barriers. And of course it would help to inform Government as to the reality of pay gaps and enable them to consider the actions that they can take if needed.

I am sure that colleagues from across the Chamber will go into greater detail about the benefits of pay gap reporting throughout their contributions, so I will not steal everyone’s material in my opening speech, but I would like just to draw attention to an example of an existing system of pay gap reporting in the UK, which of course relates to gender. In a blog post published by the London School of Economics in March of this year, it was found that gender pay gap reporting has been effective in its aim of narrowing the gap. The difference between men’s and women’s pay had shrunk by just under a fifth during the relevant time. It has affected employers because, according to the blog post, female workers

“show a strong aversion to high pay-gap employers, suggesting that organisations have felt compelled to make changes in order to attract and retain workers.”

One would hope that the same would apply in the case of ethnicity pay gaps. When speaking to some of these organisations, such as the three large banks that I mentioned in my opening remarks, it is very clear that this reporting has taught their businesses a lot and has helped to inform their action plans to create more equal workplaces. However, as the Government identified in their response to this petition, it is true that there are some complications to the reporting that will need to be overcome before proposals can be brought forward. Those have been very ably explained by Nigel Marriott in his briefing note, and I will touch on a few of them. I must stress that they are not arguments against ethnicity pay gap reporting, but an identification of what the Government will have to consider before making any proposals.

The first thing to mention is that, while it might seem easy to go straight to gender pay gap reporting as the template for ethnicity pay gap reporting, it is not as simple as replicating that, for several reasons. Gender pay gap reporting is supported by the fact that it is largely binary—not exclusively so, but given how big that discussion is, we will save it for another day—and more or less evenly distributed across the country, whereas the ethnicity breakdown in the population can alter drastically depending on where someone lives and can be made up of a much larger number of categories. That then presents a number of data protection issues, because data of that kind must never inadvertently reveal the identity of the person it reports on. For example, a small business in a predominantly white community could inadvertently reveal information about employees’ pay for just one of their employees.

Then there is the difficulty of how to disaggregate the data in the first place: what categories or descriptions should be used, and how do people truly reflect their employees’ wishes and how they prefer to be identified? That is made all the more difficult when we consider the issue of disclosure, as it is estimated that something between 5% and 40% of employees do not disclose their ethnicity.

Again, these are not arguments against ethnicity pay gap reporting, but it is important to raise these problems here and consider how we can overcome them in order to bring forward proposals. It may be that we look only to businesses with more than a certain number of employees, or report on an industry rather than at individual employer level. As my hon. Friend the Minister and I are both London MPs, I might suggest to him that London is the perfect place to trial such a scheme before rolling it out countrywide.

Either way, I hope the Government are considering this matter carefully. I note from their written response that they will look to publish their analysis of the 2018 consultation later this year, so any further information on the date of that publication and any plans to bring forward proposals would be very welcome. I will end my remarks there, Mr Hosie, and hand over to the rest of my colleagues.

--- Later in debate ---
Paul Scully Portrait Paul Scully
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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.

Stewart Hosie Portrait Stewart Hosie (in the Chair)
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I call Elliott Colburn for a brief winding-up speech.

Elliot Colburn Portrait Elliot Colburn
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I think I have half an hour, Mr Hosie, but you will be relieved to know that I will not take it all.

Stewart Hosie Portrait Stewart Hosie (in the Chair)
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I will be the judge of that.

Elliot Colburn Portrait Elliot Colburn
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I thank all right hon. and hon. Members for their contributions to this Petitions Committee debate, and I thank the petitioners for allowing us the opportunity to discuss this important topic this afternoon. The key theme in a lot of Members’ contributions was the importance of getting good data and creating evidence-based policy as a result, which is absolutely what we want to see. Of course, skin colour should not be a predeterminate of pay, and that is what we all want to see tackled in this country. I look forward to hearing more from the Department about the response to the consultation and the next steps, as I am sure the petitioners do.

Question put and agreed to.

Resolved,

That this House has considered e-petition 300105, relating to ethnicity pay gap reporting.