We were tasked in a recent research project for the Office of Manpower Economics to provide an overview and understanding of the nature of variation in workers’ remuneration within the public sector, and how this varied by ethnicity. As our project comes to an end, we take this opportunity to reflect – what have we learned about ethnicity pay gaps in the UK public sector?
Ethnicity pay gap is generally smaller in public sector than private sector
In general, ethnicity pay gaps, that is the difference in the average hourly pay between employees, in ethnic minority groups and UK-born Whites are smaller in the public sector compared to the private sector in the UK. Indeed, after accounting for a range of personal and job-related characteristics that might explain ethnicity pay gaps, unexplained pay gaps, that part which we might attribute to pay inequality, tend to be small and statistically insignificant in the public sector. In this respect, our findings are consistent with suggestions that the public sector leads the private sector in pay equality and would support government policy targeting ethnic pay gaps in the private sector. Nevertheless, we identify some important exceptions with significant unexplained pay gaps within the public sector for Black men and Black, Non UK-born White and Chinese/Other Asian women.
Figure 1: Ethnicity pay gap between private and public sectors. Note: figures are based on analysis of the Annual Population Survey and relate to unexplained ethnic pay gaps for males.
Raw ethnic pay gaps are often misleading
Our analysis shows that raw ethnic pay gaps are often misleading indicators of pay inequality. It is important to account for differences in the characteristics of workers between ethnic groups including in terms of qualifications, location of work and occupation. For example, for men within the public sector, the absence of an ethnic pay gap between the Black and UK-born White groups hides a significant unexplained pay gap. Conversely, evidence of negative raw ethnic pay gaps for non UK-born White, Indian, Pakistani/Bangladeshi and Chinese/Other Asian reflect composition effects i.e., differences in worker characteristics, rather than wage inequality.
Figure 2: Variation in raw and unexplained ethnic pay gaps between ethnic minority groups. Note: figures are based on analysis of the Annual Population Survey and relate to males in the public sector.
Important to consider differences between ethnic minority groups
There is substantial variation in both raw and unexplained ethnic pay gaps between ethnic minority groups even within the public sector. For men, the unexplained pay gap of more than 15 per cent between Black and UK-born white groups contrasts to a (statistically) insignificant gap of minus 5 per cent between Indian and UK-born White groups, where a negative gap indicates a pay advantage relative to UK-born White group. For women, the unexplained gap of 7 per cent between Black and UK-born White groups contrasts to a (statistically) insignificant gap of 3 per cent between Indian and UK-born White groups. In this respect, our analysis confirms the importance of considering differences between ethnic minority groups.
Professor O’Leary said: “We are excited to provide the first analysis of ethnicity pay gaps within the UK public sector and for those occupations covered by the Pay Review Bodies, and hope that our report will inform the Pay Review Bodies which make pay recommendations for 2.5 million workers, or around 45% of public sector employees.”
Professor Drinkwater said: “While overall our findings suggest a more positive pattern within the public than the private sector, it is important to continue to monitor ethnic pay gaps in light of the potential impact of COVID-19 and changes in migration arising from the UK leaving the EU”.