Companies should be forced to reveal ethnicity pay gaps – it’s the only way to address the problem

PwC voluntarily reported the number and says it’s trying to address the issue. To get other firms to do the same they should be forced to follow its example, writes James Moore

PWC voluntarily reported their numbers – will others follow suit? (Rex)

It says a lot about where we are when it comes to the subject of equality that when I saw a statement from PwC saying its black workers’ median average earnings were 8.3 per cent lower than those of white workers last year my initial reaction was “that’s not too bad”.

It actually is. It only looks reasonably good when compared to some of the other figures I’ve seen and the research that has been carried out to look at the problem across the UK economy.

The gap is primarily created through there being lower representation of minority ethnic employees in the highest paid positions at the firm. Partners in other words.

There’s a similar driver at work with PwC’s gender pay gap, which stood at 11.6 per cent over 2020. 

It is, obviously, illegal to pay people different rates for the same roles based on their ethnicity or their gender, although we know that this sometimes happens. Although it isn’t the primary cause of pay gaps, there is a particular problem with discretionary bonuses paid to top staff. Research has shown women tend to get less. I’ve not seen any figures when it comes to minority ethnic workers but it wouldn’t surprise me if the same wasn’t true for them. 

Now, PwC’s reporting of its ethnicity pay gaps (for the record there was a 2.7 per cent disparity with its Asian workers and a 2.2 per cent gap for those of mixed racial backgrounds) is entirely voluntary.

The same is true for other businesses I’ve seen with considerably worse numbers. 

Gender pay gap repotting was also a voluntary exercise again this year because the government suspending compulsory reporting as a result of Covid-19.

In putting both numbers out, PwC is making a statement. It saying it recognises it has a problem, is taking it seriously and is trying to address it.

I’m not entirely sure about the means the firm is using to do that. When organisations start talking about “targeted data-driven action plans” I find my eyes starting to glaze over. The idea of “career sponsorship for high potential female and ethnic minority staff” also sounds a bit patronising.

Using technology to achieve “fair work allocation”, and “recognising partners who make a positive contribution to diversity targets”? That’s more like it. Ditto setting new targets for gender and ethnic minority representation across all grades from associate to partner by 2025

But if the firm wants to try things out to find out what works best then so much the better. 

Its figures suggest that it is at least moving in the right direction. The firm says that the overall median ethnicity pay gap, including partners, decreased from 6.3 er cent in 2019 to 3.5 per cent in 2020. The median firm wide gender pay gap decreased from 14.7 per cent in to 11.6 over the same span.

You’d imagine PwC is the sort of firm where the controlling brains have had things like McKinsey research, which  has repeatedly demonstrated that firms with higher levels of diversity are more profitable and successful, brought to their attention.

But that’s not true of all businesses, which is why the inequality that blights Britain, something the current government seems bent upon underplaying or even ignoring, persists.

That 8.3 per cent figure is not good. It’s something that ought to bother the leadership of PwC. But until the reporting exercise it has conducted is made mandatory, and the far worse figures some business leaders are probably well aware exist at their own organisations are made public, the impetus to improve things more widely will not be there. 

As the TUC’s Frances O’Grady said to me: ““We need more companies to follow PWC's example . The harsh reality is that even today race still plays a significant role in determining pay and career progression.  This problem isn’t going to magic itself away.”

No it isn’t. So the government should heed her call and step in to make ethnicity pay gap reporting a legal requirement, just as gender pay gap reporting usually is.

PS: can we also start talking about disability? The only business I’ve seen to even voluntarily report on its disability pay gap is Zurich, an insurance company. It took the step because, like PwC with its ethnicity pay gap, it takes the issue seriously enough to try to address it. 

PwC says it is working towards producing a number next year. Most employers barely even recognise it as an issue. Ditto the government.