Black and minority ethnic people earn less than their white counterparts – this difference in earnings persists even after variables are controlled. There is no quick fix for this ‘ethnic penalty’ but, Jonathan Ashong Lamptey argues, transparency and accountability are steps in the right direction.

Despite the significant progress of the past 40 years, the British workplace remains unfair because people are still being paid according to the colour of their skin.

This difference in earnings between minority and majority ethnic groups is known as the ‘ethnic penalty’. It can be thought of as a tax, an additional cost incurred for being a member of a minority ethnic group.  In practical terms it is the shortfall in earnings that remains after taking into account characteristics that would reasonably be expected to influence employment opportunities, such as, age, education and local employment rates. Researchers have found evidence to support the ethnic penalty based on analysis of the Labour Force Survey. This is the largest household survey in the UK and is used to provide the official measures of employment and unemployment from the Office of National Statistics.

The data shows that there is a clear hierarchy of earnings in the British workplace revealing that different ethnic groups experience different ethnic penalties. At the bottom are Black Africans, Black Caribbeans, Pakistanis and Bangladeshis experiencing a considerable ethnic penalty in terms of their earnings and access to employment. Chinese and Indians experience some disadvantage but compete on more equal terms. Interestingly white immigrants don’t experience an ethnic penalty; they receive a benefit and have been shown to earn more than white British people. There is also evidence to show that even though Africans and Indians were more likely to stay on at school or college than the white majority, the returns they enjoyed for each additional year of study were low. This suggests that the ethnic penalty can persist even if individuals seek further education.

This information is startling, but it is not news nor is it a secret. In 2006 the Government published a research report called ‘Ethnic penalties in the labour market: Employers and discrimination’ that explores this phenomenon in great detail.  So if the government know about this, how is this issue able to persist especially given the overhaul of previous legislation in the form of the Equality Act 2010?

My work with organisations in both the public sector and private sector has shown me that organisations are well aware of their obligations to comply with the legislation. Employers are careful of falling foul of the law and a whole industry has emerged in order to help them do this. The truth is that discrimination has become insidious and the ethnic penalty is more sophisticated than initially implied. It’s no longer a case of two people doing the same job: for example one Asian, one white and both receiving different salaries. In the 21^st century to understand the ethnic penalty it is useful to be familiar with occupational segregation.

Occupational segregation describes the circumstances when different ethnic groups cluster around particular occupational groups. This becomes a problem when individuals are unable to enter occupations if they belong to a particular ethnic group. The ‘Ethnic penalties in the labour market: Employers and discrimination’ report found that men from Black African, Black Caribbean, Pakistani and Bangladeshi backgrounds had greater concentration in routine work with lower earnings. These jobs are often unskilled and vulnerable to economic fluctuations and this can explain the higher unemployment rates for these groups compared to other British people. They are also underrepresented in leadership positions particularly in the private sector.

This suggests that occupational segregation allows the ethnic penalty to occur between different occupations, for example, lawyers and security guards rather than within a single occupation like law. It’s not as simple as getting paid less in a job because someone belongs to a minority group.

Occupational segregation also concerns access to occupational groups and this can begin prior to entering the labour market. In a competitive labour market many employers look for signals of high potential, traditionally this has meant an undergraduate degree.  A recent study from the LSE found that minority ethnic students were less likely than white students to be offered a university place. This is likely to undermine the recruitment opportunities available to minority ethnic candidates.

My own research was inspired by my curiosity at the apparent lack of black accountants in the UK and the lack of data available to establish the truth of my opinion.  The Freedom of Information Act gives the right to access recorded information held by public sector organisations, this includes demographic data but there is no requirement to do the same in the private sector. Forward thinking organisations like Twitter, Facebook and Google have shared this information with the public and received criticism for the lack of diversity. However I think it is a positive step and have written about how their willingness to share this data implies a commitment to addressing these issues because they will be held accountable. There is no silver bullet to fix this problem, however transparency seems to be a step in the right direction.

Jonathan Ashong Lamptey is a PhD researcher in the department of Management at the London School of Economics. His research explores how minority ethnic professionals enhance their careers in the face of disadvantage. He is also the founder of Minority Interests, the leading research driven online resource for Minority Ethnic Professionals.