Gender, ethnicity and class pay gaps: the growing call for pay transparency

Understanding how class affects individual’s chances of progression and pay growth is difficult, to say the least. Many employers simply do not collect data on the socioeconomic backgrounds of their staff – why would they need to? However, in a world where demand for greater transparency – particularly around pay – is growing, can employers afford to continue to ignore this issue?

Dr Sam Friedman is an associate professor at the London School of Economics and co-author of The Class Ceiling: Why it Pays to be Privileged. Their research looked at the Office for National Statistics’ (ONS) Labour Force Survey data and the average annual earnings of people working in the UK’s top occupations – defined by the ONS as higher, professional and managerial occupations. Within that data set, they looked at how average annual earnings vary when you look at the different socioeconomic backgrounds of people working in those occupations – in terms of what the main breadwinner parent in a person’s family did when they were growing up.

“What that shows you is that there is a very clear class pay gap,” says Friedman. “Those from working class backgrounds, whose parents did routine or semi-routine work – cleaners, bus drivers, labourers (there’s a whole host of occupations that would come into that category). Those from these backgrounds who make it into higher professional jobs go on to make about 16% less or about £6,500 less a year than their colleagues in the same set of jobs who come from privileged, professional and managerial – middle class – backgrounds.”

Friedman admits that there may be a whole set of reasons for this gap that are completely innocent or meritocratic. To tackle this, the researchers interrogated some of the potential mechanisms by controlling the data and doing progression analysis.

“We can see what happens when we control for education, what happens when we control for all the rich variables that we have in this data set – how many hours a person works, what their level of training is, what their level of experience is. Things that might be a legitimate reason why some people are earning more than others,” he explains.

However, even once these controls are in place, and they effectively compared people who are otherwise similar in every way apart from their background, those from a privileged family still earn about 9–10% more.

“That’s a pretty powerful sign of a form of inequality that is quite concerning for notions that Britain is a healthy functioning meritocracy. It shows that it pays to be privileged.

“My take is that [employers’ understanding of the class ceiling] is patchy but the agenda is coming and it’s growing,” says Friedman. “It’s very difficult [for an employer] to claim that they don’t know and they don’t care.”

So why is there a class pay gap? Unlike with gender pay gaps – where men are sometimes paid more than women for doing the same work. Class pay gaps are far more complicated and in fact do not necessarily occur at the point of entry into a job, instead this is an issue that relates more to progressing within an organisation.

Friedman says that there is no evidence that people from working class backgrounds are being paid less for doing exactly the same work. But there is evidence that suggests that people from privileged backgrounds are progressing further and/or faster, which is why they are earning more.

Testimony obtained through interviews with individuals in top professional roles also showed that, those from privileged backgrounds were more likely to negotiate higher salaries and use the threat to leave to push-up their earnings, than those from working class backgrounds.

This is a similar issue seen between men and women – where women are far less likely to ask for a pay rise than men, which leads to greater pay gaps. A poll of 1,200 workers carried out in April by CV-Library found that two out of three men were comfortable asking for higher pay, compared with just two in five women. Even when asking for money, the survey found that men were more likely to receive a higher pay rise than women.

Friedman believes that the problem with pay progression is often down to less robust policies as people move up through an organisation.

“People in senior positions often have a tremendous amount of autonomy to essentially circumvent normal, and what are supposed to be, formal procedures around hiring and progression,” says Friedman. “And so that might be that they are able to advocate on behalf of somebody that they are potentially acting as a sponsor for.”

He gives the example of an accountancy firm which they looked at in their case study follow up work. Within the organisation there was a narrative about bringing through the next generation of partners, which involved a lot of behind the scenes advocacy. This is something that was beyond the control of HR and the usual formal controls that were in place.

“There is a role that HR has to play in tightening those procedures and making sure that hiring and particularly that progression, and progression at a senior level, is still controlled and formalised so that it’s fair.

“What it seems to be is that HR practices are much more robust at the access point to a lot of big firms – through graduate recruitment and to hiring at lower levels. But HR is often circumvented at senior levels. This is an issue where you can say this is something that systematically entrenches this form of inequality – as it does for gender as well and for ethnicity to some extent as well,” says Friedman.

He notes that people sponsoring or advocating will very often champion someone who is in one way or another in their own image – which is a very human mechanism, as we are all attracted to similarities and to people who make us feel comfortable and are like ourselves. However, he argues that this is where HR and reward must step in with formal procedures to bring a degree of accountability and impartiality to those progression decisions.

Beyond advocating, there is also the issue of what merit and performance looks like. Evidence received from the researchers’ case studies showed questions around what is valued by people at the top and the validity of these measures from people lower down the organisation.

“There’s a question about whether we need to think more about what’s valued and whether what’s valued is actually related to the work being done. Why in any way should it matter what your accent is? How does that tell you that you’re a good lawyer or a good doctor? And yet these sorts of elements of self-presentation are often hidden behind phrases such as polish or gravitas, which are used all the time to justify senior bias. It’s trying to have honest conversations about some of those behavioural codes that are actually quite powerful,” says Friedman.

Even though many employers may be aware of class bias, many do not have hard and fast data to support this. Freidman argues that employers need to start collecting this information so that they can be in a position to see this class pay gap across the board and see how it varies.

“In that regard, I would hope to one day see mandatory [class pay gap] reporting.

“It’s better to be part of the curve that’s leading the way on this because it’s going to happen at some point anyway. There’s an opportunity at the moment to lead certain industries,” concludes Friedman.

The issue of pay transparency is continuing to gather momentum, whether it’s related to gender, ethnicity or class. Some organisations are now even moving towards letting staff set their own pay levels, with employee committees in place to scrutinise and approve pay decisions. Perhaps this is a fairer way to ensure that rewards are based purely on performance and merit, rather than any conscious or unconscious bias.

The author is Dawn Lewis, content editor at REBA.