Labour's proposals for new legislation to close the ethnic pay gap are well-intentioned but littered with flaws and possible unintended consequences

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As part of its proposed equal pay legislation, the Labour Party has announced that it will introduce compulsory ethnic pay monitoring in large organisations if it forms the next government. It believes that there is a great deal of racial discrimination in Britain: many Conservatives agree. But hold on a minute.

Pay gaps exist between any defined groups. Economists focus on the gap between the average hourly pay of men and women, and to a lesser extent on gaps between different ethnicities. But they have also measured pay gaps between people with or without disabilities, between people of different sexual orientation, between religious affiliations, between tall people and short people, between people rated good-looking and those plainer, and many more. There is probably a team beavering away somewhere to estimate gaps between people with blue eyes and green eyes, or between bald people and those with ginger hair.

These differences are often unthinkingly assumed to be down to discrimination, that cardinal sin in our godless society. But much of any pay gap between groups can be statistically explained by age, educational qualifications, occupation, domestic arrangements and a host of economically-relevant characteristics and personal choices of individuals. The residual left after accounting for these factors could be down to discrimination, but also to unmeasurable personal characteristics such as attitudes to work.

These subtleties are lost on politicians. We already require organisations employing more than 250 people to publish annual assessments of their gender pay gaps, to comment on these figures, and outline policies they are going to adopt in order to reduce any gaps.

This is a costly exercise, now involving more than 14,000 organisations. It has achieved very little: the aggregate gender pay gap across the economy has continued to decline slowly as it has done for many years, but this has nothing really to do with pay monitoring, which tells us very little about any discrimination as the information supplied does not enable serious analysis.

Many firms, because of the sector they are in or as a result of historical circumstances, show very low pay gaps, or even gaps in favour of women. But this may have nothing to do with exemplary behaviour, just as a big pay gap in favour of men does not indicate a ‘bad’ employer. There are big differences in pay gaps between government departments, for instance, even though all have the same civil service recruitment and HR policies. Publication of a large gap can, however, stigmatise a business – and this leads to attempts to alter the gap through artificial means such as biased recruitment procedures (as in the recent RAF case) or by outsourcing low-paid jobs done predominantly by females.

We can expect ethnic monitoring to be a more difficult and more complicated business. There are so many different ethnicities in London, for example, that businesses will have to aggregate in categories such as ‘black’ ‘Asian’ or ‘BAME’ which conceal important differences within these categories. People of Indian or Chinese heritage earn more than whites, while Pakistani heritage employees earn much less.

Use of broad categories are often resented by those characterised in this way. They are almost certainly going to create ill-feeling within groups, and clumsy attempts by employers to address apparent inequalities could well make matters worse. It was for these reasons that the Commission on Race and Ethnic Disparities rejected compulsory ethnic monitoring. They were right to do so.

Len Shackleton

IEA Editorial and Research Fellow
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Labour could soon bring Britain’s councils to their knees ([link removed])

Len Shackleton, The Telegraph ([link removed])

A poor precedent… New ethnic pay gap legislation would be based on existing measures to tackle the gender pay gap, which have been anything but a success story.

Labour’s equal pay law risks ramping up racial tensions ([link removed])

Director of Public Policy and Communications Matthew Lesh, The Times ([link removed])

Below the radar… While ethnic pay gaps do exist, UK-born minority groups actually earn more on average than their white counterparts.
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** Policymakers must put evidence before politics, urges new EPICENTER paper ([link removed])
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Short-termism has infected policymaking in key areas such as energy, lifestyle, pensions and agriculture policy.
* There is a vast gulf between politicians’ stated belief in evidence-based policymaking and actual policy choices.
* Energy policy across Europe has excessively focused on decarbonisation to the detriment of affordability and national security.
* The war on drugs and vaping has undermined the effort to reduce drug-related harms.
* Policymakers have failed to implement meaningful pension reforms despite an ageing population making the system unsustainable.
* Agricultural subsidies and regulations have driven up food prices and held back innovation.

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** Media coverage across Europe
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Continental shift… QED has featured in media throughout countries with EPICENTER member think tanks, including France ([link removed]) , Spain ([link removed]) , Romania ([link removed]) , and Greece ([link removed]) .
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** More about EPICENTER ([link removed])
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The European Policy Information Center (EPICENTER) is a network of ten leading think tanks (including the IEA) from across Europe.

It seeks to inform the European policy debate and promote the principles of a free society by bringing together the expertise of its members.

QED is just the latest piece of pan-European research, which also includes the biannual Nanny State Index ([link removed]) and papers like Raising Barriers ([link removed]) and Green Alert ([link removed]) .
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IEA Latest.
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** Milton Friedman: The Last Conservative ([link removed])
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Executive Director Tom Clougherty interviews Stanford University Professor Jennifer Burns, IEA YouTube ([link removed])

In case you missed it… Last week’s IEA Book Club event on Jennifer Burns’ new book, Milton Friedman: The Last Conservative, featured a wide-ranging discussion on the ideas and intellectual evolution of the great economist.
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Hamas’s useful idiots misunderstand imperialist history ([link removed])

Editorial Director Kristian Niemietz, The Daily Telegraph ([link removed])

Founding myths… The idea that the success of market economies in Britain and the West is founded on slavery and imperialism is growing. But that doesn’t mean it’s accurate.
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Let’s be honest, social media bans won’t stop hate crimes ([link removed])

Matthew Lesh, City AM ([link removed])

Scapegoated… The tragic murder of teenager Brianna Ghey has provoked more calls for social media crackdowns. But the case for blaming social media for the world’s ills is weak at best.
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Will Banning Under 16s from Social Media Stop Hate Crime? | IEA Podcast ([link removed])

Matthew Lesh interviews author Timandra Harkness, IEA YouTube ([link removed])

Wrong target… From political campaigns to business marketing, social media has radically changed the nature of human activity - and not all of that change has been negative.
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** The first step to improving our railways is cracking down on strikes ([link removed])
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Len Shackleton, CapX ([link removed]) & IEA Blog ([link removed])

A record of failure… Britain’s railways need more innovation and fewer strikes. Nationalisation has a poor record on both.
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Ignore Nigel Farage’s defeatism – we can cope with a growing population ([link removed])

Kristian Niemietz, CapX ([link removed])

Zero-sum mindset… Britain, South Korea, Taiwan, Singapore, and Japan (to name a few) have experienced economic booms with a growing population. The key to mixing both is building.
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** Government urged to 'do right thing' and raise minimum alcohol price ([link removed])
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Head of Lifestyle Economics Christopher Snowdon, STV ([link removed]) , The Herald ([link removed]) , Planet Radio ([link removed]) , Press & Journal ([link removed]) & Sunday Post, p.4

Not evidence-based… Minimum alcohol pricing has not stopped alcohol-related deaths rising to a 14-year high. Nonetheless, the Scottish government intends to double down.

IEA Insider.


** IEA Book Club Event with Stephen Davies ([link removed])
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Date: Tuesday 20th February

Time: 17:30 – 19:30

Location: IEA (2 Lord North Street, Westminster, London, SW1P 3LB)

The Covid-19 pandemic was, and remains, a global disaster – claiming countless lives and wreaking economic havoc that still reverberates today. But it could have been worse. Much worse.

In his new book ([link removed]) , IEA Senior Education Fellow Stephen Davies contends the planet ‘dodged a bullet’ this time around. But he warns this was no black swan event: The conflicts in the Ukraine and the Middle East already threaten global stability. And the next existential threat to mankind could happen much sooner than we think.

He analyses the potential catastrophes – from nuclear war and sudden climate change to further pandemics, the misuse of Artificial Intelligence and more – that could jeopardise our planet and its people.
RSVP (mailto:[email protected]?subject=IEA%20Book%20Club%20with%20Stephen%20Davies&body=Please%20may%20I%20RSVP%20for%20the%20'Apocalypse%20Next'%20Book%20Club%20event%20on%2012th%20February%3F)
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** IEA welcomes students from Liverpool John Moores University
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We were delighted to welcome economics students from Liverpool John Moores University to the IEA this week for a series of talks led by Kristian Niemietz, Andy Mayer, and Reem Ibrahim. Education Coordinator Matthew Prescod organised the event and discussed the wide range of student events ([link removed]) we have planned for the coming months.
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