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22 Sep 2021
by Dawn Lewis

REBA’s inside track: Facing uncomfortable truths about pay and socio-economic background

Pay gap reporting is never far from the headlines, but with two of the UK’s largest professional services firms unveiling their socio-economic background pay gap report in the past week, could we finally be on the right path to tackling the root causes of pay gaps? No matter how uncomfortable that might be.




Understanding socio-economic background

An individual’s socio-economic background broadly refers to their parents’ occupation and this is generally accepted as the most robust and reliable measure. A person’s background is a key determinant of access to opportunity, success and future life chances.

The link to diversity, equity and inclusion (DEI) in the workplace is obvious, and crucially there are often important relationships and interplay between socio-economic background and other protected characteristics such as ethnicity, disability and gender. Gathering data on this important measure can only help to strengthen employers’ understanding of how their DEI policies are working and affecting change.

Afterall, it's not just about ‘getting in’, it’s about ‘getting on’.

A growing issue

The government’s 2021 Social Mobility Barometer highlights that the public believe there are issues with social mobility in the UK. It found that over half the public (56%) think the pandemic has increased social inequality, while an increasing number of people say that employers should have to take action to improve social mobility – 42% in 2021 compared with 31% in 2019.

The issue of social mobility is a long-standing one. Back in 2019 REBA spoke to Dr Sam Friedman, associate professor at the London School of Economics and co-author of The Class Ceiling: Why it Pays to be Privileged, about the socio-economic pay gap.

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.

In his interview with REBA, he noted that many employers simply do not hold socio-economic data on their staff, making it difficult for them to ascertain the scale of the problem. However, he argued that it is unlikely that employers are entirely unaware of the type of background from which their employees stem, and he warned that momentum behind this issue is growing.

Analysing the gap and making a plan

The move by KPMG and PwC to announce their socio-economic background pay gap figures is a brave one, and is not without its difficulties. Even defining different socio-economic groups and choosing how to calculate the gap is problematic. KPMG, for instance, has worked with social equality experts, the Bridge Group, to develop its method of calculation which benchmarks against relevant groups within Labour Force Survey data.

KPMG’s analysis shows that 39% of the UK workforce is from a working-class background. Currently 23% of its partners and 20% of its directors are from a working-class background. It has set itself an ambitious target that aims to see 29% of its partners and directors from a working-class background by 2030. In terms of pay, its median socio-economic background pay gap including partners when comparing those from professional and working class backgrounds, is 8.6%.

PwC used a calculation method advocated by the Social Mobility Commission, which uses information on employees’ parental occupation, to analysis both the pay gap and the representation by grade data. It found its median socio-economic background pay gap including partners to be 12.1%.

As with any DEI approach, simply setting targets is not enough to affect lasting change. Headcount and representation does not necessarily resolve the issue of inequality, and so changes to policies, practices and process need to be implemented to make a permanent difference. And so it is unsurprising that both organisations have published social mobility action plans to address disparities in their workforces and improve social mobility.

PwC aims to create change through inclusion, community and advocacy. It will do this by attracting and recruiting more people from disadvantaged backgrounds, and helping everyone to develop and progress while at PwC; it will support social mobility within disadvantaged communities; and advocate the importance of increased social mobility and the impact of its strategy and actions.

KPMG also unveiled its social mobility action plan which sets out the five ways in which it intends to address its pay gaps. These include setting targets, introducing a new Social Mobility Network, and publishing the socio-economic background of its Board and Executive Committee. It also aims to increase its focus on socio-economic background during its recruitment process, and offer training to all colleagues on this issue and the invisible barriers that exist. It will also improve progression opportunities and continue to analyse the intersectional challenges facing colleagues from lower socio-economic backgrounds.

Creating lasting change

Shifting the dial on social mobility to create a more diverse, inclusive and equitable business is not easy and requires employers to face some harsh truths about the make-up of their workforce. But only by getting a full picture of the causes of pay gaps can we begin to eradicate them.

Looking at different characteristics in isolation is akin to plugging a leak in a pipe only to find it is leaking elsewhere. Only by considering the whole picture can we create truly diverse, equitable and inclusive organisations.

As Bina Mehta, chair at KPMG in the UK, says: “This isn't about simply reporting more data. It's about shining a light on what's truly happening within organisations so that targeted action can be taken to help create a fairer and more equitable society.”

The author is Dawn Lewis, content editor at REBA.