PAY, POVERTY AND ETHNICITY IN THE UK

Dr Tolu olarewaju, Lecturer at Staffordshire business School


In 2017, the average (median) hourly pay for White people within the UK was £11.34, which was 10p higher than the average hourly pay for people from all other ethnic groups combined. However, Indian people had the highest average hourly pay (at £13.14), while Pakistani and Bangladeshi people had the lowest (at £9.52), Black people had an average hourly pay of £11.10, while Chinese and other Asian people had an average hourly pay of £11.05.

Birmingham New Street. Image Source: Taken by Author.

Research also reveals that the poverty rate is twice as high for Black, Asian & Minority Ethnic (BAME) groups compared to White groups within the UK. However, there is wide variation between different ethnic groups. Reports indicate that poverty rates are about 50% for Bangladeshi, 47% for Pakistani, 40% for Black, 35% for Chinese, and 25% for Indian, compared with 19% for White.

There are also some groups who are more frequently in persistent poverty (individuals are considered to be experiencing relative poverty if they live in a household with an equivalised disposable income that falls below 60% of the national median in the current year while persistent poverty is defined as experiencing relative low income in the current year, as well as at least 2 out of the 3 preceding years – in 2015, the poverty threshold in the UK was £12,567). Caribbean, Bangladeshi, African and Pakistani individuals have persistent poverty rates of 23%, 24%, 31% and 37% respectively. This compares with 13% for White individuals.

Within White groups, poverty rates differ too. For example, Gypsy/Irish travellers experience some of the highest unemployment rates of all ethnic groups and concentration in low pay for some EU migrants is also substantial.  This seems to be particularly expressed in homelessness rates for EU migrants with 36% of rough-sleepers being from Central and Eastern European (CEE) countries, 5% from African countries and 4% from Asian countries. However, a greater proportion of EU citizens have work compared to BAME citizens within the UK.

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DRIVERS OF POVERTY FOR ETHNIC GROUPS IN THE UK

Unemployment: According to current figures, while the unemployment rate for White British and White other is 4%, the unemployment rate for Asians is 7%, with Indian 6%, Pakistani/Bangladeshi 10%, Black 9% and Mixed 10%. However, the unemployment gap between White and BAME groups seems to have been improving over the last decade, and Indian and Chinese workers have relatively better success in the labour market than other ethnic minority groups. The unemployment rate interacts with the hourly wage rate to determine poverty levels. Overall, just under 4% of White people are unemployed, compared with 8% of people from all other ethnic groups combined.

Type of work: A closer look at the data reveals that 55% of people in poverty are currently in a working family. However, one very important driver for the disproportionately high poverty rates among some ethnic groups is the concentration of BAME workers in low-paid work. BAME groups are more likely to work in low-paid sectors such as caring, sales, catering, hairdressing, elementary and clothing professions – occupations with limited progression opportunities and lower wages. It is this lack of movement out of low-paid work that increases the risk of poverty among ethnic groups. In fact, a key reason why Indian people earn more than White people per hour is because there are more Indian people in professional jobs (at 31%) than any other ethnic groups. “Percentage of workers in different types of occupation by ethnicity” figures also reveal that the least proportion of people who are managers, directors and senior officials are Black people.

Lack of Return for Education Qualifications/Improvement of Skills: BAME groups are more likely to be overqualified for the jobs they work in and less likely to get a good return for university education. Figures reveal that 40% of African and 39% of Bangladeshi employees were overqualified for their roles, compared with 25% of White workers. BAME workers often report not being given pay rises when their White colleagues get them or being passed over for promotion.

Dr Tolu Olarewaju presenting at Staffordshire University.

Entrepreneurship: Another route of poverty could be via entrepreneurship. Research reveals that more ethnic diversity within the UK enhances entrepreneurship. Interestingly, that research also revealed that Black people have the greatest likelihood of starting up a business, followed by Mixed people, Pakistani/Bangladeshi people, people from other Asian groups, White people who were not Irish, Indian people and then White people who were Irish. Here again however, there are variations between those born in the UK and foreign-born individuals; with being foreign born not so positive for entrepreneurship. Another reason for poverty in BAME ethnic groups could be the type of entrepreneurship that they engage in.

In addition, BAME groups are more likely to experience inactivity and lower levels of pay for the same job compared to White groups. Underlying these drivers are several other factors which include geographical location, racism and discrimination, and migration status. For example, first generation migrants might experience pay gaps that cannot be explained by the drivers above alone. The experience of poverty is particularly problematic for BAME communities because of the racial prejudice that they suffer already.

IMPLICATIONS FOR THE UK AND POSSIBLE SOLUTIONS

Apart from the moral reasons for wanting to eradicate poverty from our society, the government commissioned McGregor-Smith review of BAME talent and progress at work estimates that having full representation of BAME workers in the labour market, through improving both their rates of progression out of low-paid roles and increased access to higher paid and more senior jobs, would both help reduce poverty within the country significantly and would benefit the UK economy by £24 billion a year.

In addition, poverty has devastating consequences for the people who live in it. The vicious cycle of poverty means that lifelong barriers and troubles are passed on from one generation to the next. Poverty is also a major cause of social tensions and wealth inequality contributed to the downfall of Rome.

To reduce ethnic poverty within the UK, I agree that policies and interventions that will tackle low pay among BAME workers, such as working with employers to provide better paid jobs, should be encouraged. Ethnic pay-gap reporting could also help. Policies should also be encouraged that monitor workforces by ethnicity which should include the recruitment, retention and progression phases of jobs. In addition, there is a need for policies that focus on skills and training for BAME groups especially digital, literacy and numeracy skills.

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