The path to a more socially diverse and inclusive workforce

By Dr Claire Tyler

CEPEO recently launched New Opportunities: our evidence-based policy priorities for equalising opportunities. In this weekly blog, we are highlighting one of our priorities and the reasoning and evidence behind them. This week, we are focusing on socio-economic inequalities in the workplace and how employers can use data to create more socially diverse and inclusive organisations.

Evidence consistently shows that an individual’s social background predicts their chances of accessing a ‘top job’ such as a professional or managerial career – for example, 74% of medical professionals, 64% of journalists and lawyers and 89% of senior financial services professionals originate from professional or managerial backgrounds compared to 33% of the population. Two-fifths of Britain’s ‘leading people’ attended independent schools compared to 7% of the population. Even comparing graduates with similar academic backgrounds, privately educated graduates are still a third more likely to enter top jobs than comparable peers from state school.

But this isn’t just an issue of access: large socioeconomic pay and progression gaps also exist within many occupations. Individuals from working-class backgrounds earn 16% less in top jobs compared to colleagues from more privileged backgrounds. And These issues of access, pay and progression gaps by social background mirror those faced by women and ethnic minorities in the workforce. These gaps could therefore be targeted by a similar data-led policy approach – mandatory gender pay gap reporting was introduced in 2017 in the UK and mandatory ethnicity pay gap reporting is on the horizon after the government released guidance for voluntary reporting last month.

So what do we propose? We suggest the introduction of both entry and pay gap audits by socio-economic background. Employers would report: 1) the proportion of individuals from different socio-economic backgrounds entering occupations (which are easily compared to national benchmarks), and 2) pay inequalities by socio-economic background in a similar way to current gender pay-gap reporting. This policy would shine a light on current disparities in both access and progression of individuals from lower-socioeconomic backgrounds and reveal if career opportunities are being equalised over time.

Why is this a policy priority? Creating a level-playing field in the workplace is not only the ‘right thing to do’; it is also economically advantageous – a win-win strategy. Recent work shows that reduced workplace discrimination improves the allocation of talent in the labour market and drives economic growth. The growing ‘business case’ for diversity argues that more inclusive workforces drive profitability, innovation and better decision making.

It is also the right time for such a policy – the growth of EDI (equality, diversity and inclusion) agendas alongside more responsible and sustainable business practices (such as ESG reporting) has raised the profile of socio-economic diversity in recruitment, promotion and retention. Young people increasingly aspire to work for companies with a strong commitment to diversity – 72% of workers aged 18- 34 recently said they would consider turning down a job offer or leaving a company if they did not think that their manager (or potential manager) supported EDI initiatives. The policy would also crucially provide employers with a baseline for monitoring the impact of their own diversity initiatives and identify ‘what works’ for creating more diverse organisations –particularly vital insight at time when early talent teams are dropping academic credentials, navigating hybrid working for new recruits and designing alternative pathways into careers to widen and diversify their talent pools.

The policy is also likely to have a substantial impact – recent evidence on the effectiveness of UK gender pay gap legislation shows that pay transparency increases the probability of women working in above-median-wage occupations by 5% and closes the gender pay gap by 18%. Evidence on social background shows that firms returning year-on-year to the Social Mobility Employer Index are more likely to demonstrate progress on social mobility – they are four times more likely to be collecting at least three socioeconomic background data points than new entrants to the index, suggesting that transparency and focus can facilitate change.

While most policy levers available to government to equalise opportunities occur before labour market entry, this policy priority highlights one way in which government can hold employers to account for their role in equalising opportunities. If the government is committed to collecting and using data differently to improve social mobility (as stated here), introducing entry and pay gap audits by social background is a cost-effective place to start with benefits for employees, firms and society.