Poverty and ethnicity: the impact of occupational segregation

Background

Evidence suggests that certain ethnic minority groups suffer lower earnings, work in lower status occupations and are more likely to be unemployed than their white British counterparts.

There is also evidence that some groups cluster into certain occupations such as the health sector, which contains many secure and well-paid jobs, while others are over-represented in low-paid sectors such as hotels, restaurants and the distribution industry.

As a result of occupational segregation ethnic minorities are more likely than the white British majority to experience poverty. The segregation itself can be explained in a number of ways:

• discriminatory practices
• failure of employers to recognise foreign qualifications
• lack of appropriate skills
• the influence of the neighbourhood and social networks

A better understanding of the varied ways in which minorities can end up in poverty through being locked into specific occupational ‘hotspots’ should help the design of more effective policy measures, whether these are to do with legislation, liaison with employers in specific occupations, career advice for minority workers, or improved training for young people, especially women.

By isolating and assessing the impact of things like discrimination, lack of training or appropriate aspirations, the inability to use skills or education effectively, residential segregation, policy responses can be better shaped to fit the complex patterns of ethnic-minority employment.

Project methods

As part of a Joseph Rowntree Foundation-funded series providing statistical analysis of how ethnicity and poverty are linked, this research examined why ethnic minority groups are more likely than the majority group to work for less than the living wage.

The study:

• examines why this is the case, using two large-scale datasets to analyse what types of job ethnic minority groups tend to do; and
• calculates the minority–majority wage gaps associated with particular occupations.

The research was based on two large-scale datasets, the Labour Force Survey and the UK Household Panel Survey. The analysis examined the wages of a number of ethnic minority groups compared with White ethnic groups, and looked at over 80 occupations to pinpoint the different situations that ethnic minority groups typically face.

Key findings

• Ethnic minority workers were more likely than White employees to receive less than the living wage.
• Although the wage gap relative to White employees was limited within occupations, it was significantly higher across employment sectors, implying that ethnic minority employees tend to be concentrated in low-paying occupations.
• Ethnic minority employees fared well in some occupations, especially in the health sector. They were over-represented in some low-paying sectors such as catering, and under-represented in several which paid reasonably well, like metal-working and printing, or where there was a wage gap in their favour. The latter included clerical and some communications work.
• Considerable movement in and out of low pay occurred over even a short time period, but movement into low pay was more common among virtually all ethnic minority groups than for the White British majority.
• While ethnic minority employees suffered a wage gap relative to White workers, this was far less of a problem for ethnic minority women than for men. There was therefore no significant reinforcement of ethnic and gender wage inequality.
• Failure of education among ethnic minority groups was not a cause of poverty among ethnic minority employees, who tended to have slightly higher educational qualifications than the White majority and were as likely as the latter to work in graduate professions. However, ethnic minority employees were more likely to be overqualified for the work they were doing.

Recommendations

Policy designed to limit wage discrimination remains important – indeed vital – but has limited potential to reduce inequality further or to lessen the vulnerability of ethnic minority groups to poverty. The key point is to try to improve their access to better-paying occupations. Although the analysis suggests that even in these sectors ethnic minority employees were likely to be in work paying relatively poorly, the wage gap within occupations was fairly narrow.

How to improve access is clearly far from straightforward. Useful initiatives might include better schools careers services information on employment prospects, role models for entry into particular sectors, and provision to ensure that ethnic minority employees can benefit from vocational training equally with White workers. However, demand also needs to be influenced and tackled. Problems in specific occupations could be addressed through analysing recruitment procedures as well as through negotiation with employers offering such work, to identify issues and possible actions to overcome them.