The UK ethnicity pay gap: trends and stats

Fair pay is a cornerstone of a healthy economy and society. Yet, in the UK, we’ve seen an enduring gap between what men and women earn for the same role.

An ethnicity pay gap refers to the difference in average earnings between different ethnic groups within the labour market against the traditional “reference market” which is the White/White British category.

Tackling this ethnicity pay gap in our workforce is not just the responsibility of large businesses, but for everyone – as it has significant ramifications for fairness, economic opportunity, and ultimately, the nation’s prosperity.

This article delves into the latest trends and statistics surrounding the UK ethnicity pay gap in 2024, providing valuable insights for employers, employees, and policymakers alike.

The UK ethnicity pay gap

The current UK job market presents a mixed picture regarding ethnicity and pay. 

On one hand, a persistent and concerning ethnicity pay gap exists. Office of National Statistics data from 2012 to 2022 demonstrates a persistent pay gap between Black British workers and their White counterparts. 

Black employees from outside the UK in particular (Black, African, Caribbean), earned up to 12% less, which translated to a substantial difference of £1.31 per hour – a disparity that has remained unchanged for over a decade, suggesting a deeply entrenched issue.

There are some signs of progress, however. Asian or Asian British workers reported higher average hourly earnings compared to White workers in 2022. This suggests the gap might be narrowing in certain sectors due to an increase in new openings in the tech and financial spaces, and Asians occupying these higher-paying jobs. 

While this is a positive development, there is still a lot of work to do when it comes to equal pay across all ethnicities.

Understanding the ethnicity pay gap

The ethnicity pay gap is a multifaceted issue with several contributing factors. Here are some key issues that contribute to it:

Occupational segregation

Occupational segregation is where certain ethnicities are disproportionately concentrated in specific professions – another significant factor contributing to the overall ethnicity pay gap, according to research by the Joseph Rowntree Foundation. 

Sectors traditionally dominated by ethnic minorities such as care work or hospitality have low average salaries (that just pass the national living wage) in comparison to fields where ethnic minorities are underrepresented and hired less, such as finance or engineering. 

Across the board, this phenomenon also tends to relegate ethnic minorities to lower-paying jobs across various industries through stereotyping and unconscious bias, for example, what is recommended to you by job centres.

This lack of diversity across job roles creates a defunct situation where your ethnicity may determine your income, not necessarily your qualifications or experience.

This concentration in lower-paying jobs pulls down the average earnings for ethnic minorities compared to White workers. This is also a reason why White workers demonstrate a larger Class Pay Gap than Black or Asian workers.

Psychological and systemic barriers

Beyond the structural barriers contributing to the ethnic pay gap, there’s also a psychological dimension to consider. Research from the American Psychological Association suggests that experiences of discrimination and lower pay in the past can lead to a sense of learned helplessness and reduced career aspirations among ethnic minorities. 

This can manifest as a lack of confidence in applying for higher-paying roles and a belief that success is unlikely due to past rejections. This reinforces the cycle of underrepresentation in higher-earning positions.

Perpetual discouragement can lead to a self-fulfilling prophecy, where individuals internalise negative stereotypes and subconsciously limit their career aspirations.

The role of education

While education can be a powerful tool for upward mobility, it doesn’t eliminate the pay gap. Even with similar qualifications, Black and Asian employees may still earn less than their White counterparts. 

The Institute for Fiscal Studies has also said in an article that there has barely been any change to the gender earnings gap in the last 25 years if you account for increases in women’s education.

Beyond race

While the ethnicity pay gap is a major concern, it’s crucial to acknowledge the intersectional factors at play. 

Earnings statistically decrease due to an individual’s ethnicity, and decrease further if you are a woman: Women from minority ethnic backgrounds often experience a double disadvantage, facing a pay gap compared to both White men and White women.

The practice of keeping salaries confidential, also known as pay secrecy, also hinders women’s ability to negotiate for better pay and contributes to the persistent gender wage gap. While a direct causal link between the two hasn’t been definitively established, data suggests a correlation. 

For example, women in the UK still earn 17.9% less than men per hour, according to the latest figures from the Office for National Statistics (ONS). This translates to a median gender pay gap of £2.81 per hour.

This lack of transparency can disproportionately affect women, who may be less likely to initiate salary discussions or may feel less confident advocating for themselves. 

This goes even further if you are part of the LGBTQ community.

Other factors include:

• Unconscious bias: Unconscious bias is a prejudice or stereotype that influences our thoughts and actions without our conscious awareness. When they are based on race or ethnicity, they can influence hiring, promotions and salary, even if the employer is unaware of it. A study by Harvard Business Review found that resumes with stereotypically “White-sounding” names received 50% more callbacks than those with stereotypically “Black-sounding” names, highlighting the impact of unconscious bias in the hiring process, even when the qualifications were identical.
• Discrimination: A 2023 report by The Runnymede Trust, a UK-based race equality think tank, found that 60% of Black, Asian and Minority Ethnic (BAME) employees in the UK believe they have experienced racial discrimination at work.
• Perception of skills: while qualifications are important, perception of skills and experience can be influenced by ethnicity. A 2022 study by the Chartered Institute of Personnel and Development (CIPD), the UK’s professional body for HR, revealed that 24% of BAME respondents felt their skills and experience were undervalued compared to their White colleagues.
• Unequal access to education and training: ethnic minorities may face barriers to accessing quality education and training programs, which can limit their job opportunities (particularly in startups) and earning potential. A 2021 report by the Runnymede Trust found that BAME students were less likely than White students to attend top universities. Additionally, the cost of some private training programs, especially after National Insurance (NI) deductions from salaries, can be a barrier for some individuals.

What can be done to close the ethnicity pay gap?

Startups conducted exclusive research on the ethnicity pay gap, surveyed over 600 people, and found a generally positive outlook on employee compensation. 

A significant majority, 71%, of businesses believe they will likely meet employee pay expectations. This optimism extends further, with 70% expressing confidence in exceeding expectations.

However, a minority, 8%, hold a less optimistic view. This includes 2% who believe it’s not likely at all, and 6% who find it not very likely that they will meet pay expectations this year. This could be due to financial constraints or a more conservative compensation strategy.

The research also highlights industry differences, particularly on the matter of Diversity, Equity, and Inclusion (DEI). The Creative Arts and Media sector leads in commitment to enhancing DEI initiatives this year (13%), while Transportation and Education lag behind (0%).

Addressing the ethnicity pay gap requires a multi-pronged approach, focusing on both policy and workplace practices:

• Promoting transparency: pay transparency initiatives, where salary ranges are made public for all roles, can help expose and address unfair pay discrepancies. Just 51.5% of UK job ads disclosed an intended salary or salary range in April 2023 in the UK, signifying a corporate desire for flexibility and secrecy in their wage schemes. In a bold and progressive response to this, the EU recently passed the Pay Transparency Directive, which will require companies to be more transparent on pay from 7 June 2026 – although news of this for the UK remains to be seen.
• Upskilling and reskilling programs: targeted programmes designed to address the skills gap faced by some ethnic minorities can equip them for higher-paying jobs. Initiatives like the ones offered by The Bridge Group (a UK-based social enterprise focused on skills development) can provide valuable training and support to help ethnic minorities gain the skills needed for success in high-demand sectors.
• Unconscious bias training: unconscious bias often plays a role in hiring and promotion decisions. Educating employers and managers on unconscious bias and its impact on recruitment and promotion decisions is crucial. The Equality and Human Rights Commission (EHRC) offers resources and training programs to help employers recognise and mitigate unconscious bias in the workplace.
• Mentorship and sponsorship programs: connecting employees from minority backgrounds with mentors and sponsors can provide valuable guidance and support for career advancement. Organisations like Women in Technology (WIT), a prominent UK organisation dedicated to empowering women in the tech sector, offer targeted mentorship programmes. These programmes connect women and ethnic minorities with experienced professionals who can provide valuable guidance and support on career development, skill-building, and navigating the tech industry.
• Government legislation: stronger legislation requiring employers to demonstrate fair pay practices across ethnicities is crucial to enforce change. The Equality Act 2010 in the UK prohibits discrimination based on race or ethnicity, but further measures may be needed to ensure its effective implementation. Ethnicity pay gap reporting is not yet a legal requirement in the UK, however, the government has issued guidance to support employers who choose to do so voluntarily.
• Diversity, equity and inclusion initiatives: implementing effective DEI initiatives, like unconscious bias training, diverse recruitment practices, and mentorship programs for underrepresented groups, can create a more equitable workplace culture and dismantle unconscious bias. (it’s not just another box to tick.)

Conclusion

The persistent ethnicity pay gap in the UK workplace isn’t a reflection on any individual or racial group, nor is this research intended to shame high earners.  Instead, it serves as a call to action for corporations to acknowledge and address biases within their hiring and promotion practices. 

Working together can help unlock the UK’s full economic potential – benefiting individuals and corporations alike in retaining the best possible talent, regardless of background: a win-win scenario for everyone involved.