Racial wealth gap reality check: Minorities earn 7-10% less than White counterparts — at same company

LONDON — The racial wealth gap remains a serious problem across companies worldwide, and a new study is shedding more light on the severity of the issue. Ethnic minorities stand to earn around 10 percent less than their White counterparts working at the very same company, according to new joint research from University College London and the University of Cyprus.

Study authors set out to analyze the full scope of ethnic wage gaps across full-time employees. Importantly, researchers were sure to consider the segregation of White and ethnic minority workers among different varieties of workplaces. These findings are based on nationally representative survey data collected in Great Britain. More specifically, the team had access to detailed information on employees, their co-workers, and their employers.

This project is the first ever in the United Kingdom to indicate that the majority of the aggregate wage gap exists within the workplace, between White and ethnic minority co-workers, not across high and low wage firms.

Co-authored by Dr. John Forth, Senior Lecturer in Human Resource Management at the UCL Bayes Business School, the study suggests employers need to do more to address and correct pay inequality in the workplace. “While there may have been explanations for ethnicity pay gaps across different sectors and careers, this is the first research to show that the problem extends to those with comparative positions within companies,” Dr. Forth says in a statement. “The research paper intensifies the need for measures which bring about greater fairness in pay setting within firms.”

‘Ethnic wage gaps have not been closing'

Many theorize that the observed U.K. economy-level pay gap between white and ethnic minority workers can be explained by ethnic minorities tending to work at companies that pay relatively low wages to all their employees. This latest work, however, tells us that an average wage gap still separates ethnic minority and White employees — even after accounting for fluctuations in job type, educational qualifications, and company characteristics.

Researchers report male ethnic minority employees earn roughly 10 percent less, on average, than their White co-workers with the same characteristics. Female ethnic minority employees, meanwhile, earn around seven percent less, on average, than their White female co-workers with the same characteristics. On a related note, ethnic minorities of both genders were deemed more likely than their White counterparts to feel over-skilled and underpaid in their role.

The average ethnic wage penalty is about one-third smaller in companies with a job evaluation scheme. Similarly, ethnic wage policies are also smaller in workplaces with a recognized trade union. Conversely, the ethnic wage gap is no smaller among workplaces that have voluntarily reviewed relative pay rates by ethnicity. This suggests more oversight may be necessary to rectify the issue.

“Whereas the gender wage gap has been gradually closing in Britain for some time, ethnic wage gaps have not been closing. Ours is the first study to show that most of the earnings disparities across ethnic groups in Britain occur within workplaces, rather than across workplaces. This means employers need to do more to ensure employees from ethnic minority groups are treated fairly in the workplace,” adds Alex Bryson, Professor of Quantitative Social Science at UCL’s Social Research Institute.

The study is published in the British Journal of Industrial Relations.