Ethnic Penalties in the Labour Market: What Role does

Discrimination Play?Anthony Heath

Department of Sociology

Oxford University

Aims

To review both the gross and the net disadvantages (ethnic penalties) of ethnic minorities in the British labour market, focusing on unemployment in the second generation

To explore some evidence on discrimination by employers

To assess what role discrimination might play in accounting for the ethnic penalties

Gross and net disadvantages

Gross disadvantages are the overall disadvantages, eg with respect to unemployment, before taking account of differences in age or education. They must not be equated with inequality of opportunity.

Some ethnic groups are relatively young and have relatively low levels of education, and this might account (in part) for their high unemployment rates.

Hence we need to look at the net disadvantages, after taking account of age and education.

Ethnic penalties

Ethnic penalties are defined as the net disadvantages experienced by ethnic minorities after controlling for their educational qualifications and age (experience in the labour market).

That is, they are estimates of the disadvantages experienced in comparison with equally-qualified members of the charter population of the same age.

Ethnic penalties 2

Ethnic penalties cannot be equated with discrimination, although discrimination is likely to be a major factor. Other possible factors include lack of ‘bridging’ social networks, ‘spatial mismatch’, differences in aspirations and preferences, or alternative opportunities eg through the informal economy.

Ethnic penalties in the labour market are quite distinct from pre-labour market penalties, eg in education (on which there is also considerable evidence)

Generations

It is very important to distinguish between the • First generation – born overseas and usually

arriving in early adulthood – from the• Second generation – born and educated in

Britain.

We can also identify a ‘one and a half’ generation who arrived during their years of schooling, but we do not do so in this presentation.

Generations 2

There are many reasons why the first generation might fare badly in the labour market:

• Foreign qualifications• Lack of fluency in English• Foreign labour market experience• Lack of familiarity with British practices.

These reasons would not apply to the second generation to anything like the same extent.

Generations 3

Hence experience of the second generation is the key test of whether Britain extends principles of ‘equality of opportunity’ to ethnic minorities.

Recent French experience suggests that grievances among the second generation over perceived inequalities of opportunity may be one factor in contributing to social disorder.

Inequalities of opportunity are also economically inefficient as well as socially unjust.

Data sources

• General Household surveys (pooled)

• Labour Force surveys (pooled)

• Public use sample of the 2001 Census

• Home Office Citizenship survey 2003.

Ethnicity

Following standard Census practice we focus on ‘visible’ ethnic minorities, namely

• Black Africans

• Black Caribbeans

• Black mixed

• Indians

• Pakistanis

% unemployed

Men Women Born

outside UK Born in the

UK Born

outside UK Born in the

UK White British 4.2 4.5 4.1 3.7 Irish 6.2 6.1 6.1 3.9 Other white 5.7 7.6 5.9 6.3 Dual ancestry – white and black Caribbean

* 11.5 * 10.4

Dual ancestry – white and Asian

* 5.2 * 5.1

Chinese 5.1 3.7 7.0 * Indian 5.6 5.4 4.7 5.1 Pakistani 11.1 12.4 9.9 13.0 Bangladeshi 17.4 * 25.5 * Black Caribbean 13.3 12.7 9.6 6.5 Black African 14.1 11.8 16.2 12.5 Source: SARS 2001, respondents aged 30-44 living in England and Wales.

% in semi-routine or routine occupations Men Women Born

outside UK Born in the

UK Born

outside UK Born in the

UK White British 13.7 21.2 18.7 27.9 Irish 14.4 13.3 17.0 11.3 Other white 12.4 13.2 14.4 17.2 Dual ancestry – white and black Caribbean

* 29.3 * 26.9

Dual ancestry – white and Asian

16.5 12.7 * 19.9

Chinese 17.4 3.9 22.7 11.5 Indian 21.1 17.5 33.6 16.8 Pakistani 34.1 16.4 36.6 21.2 Bangladeshi 41.9 34.3 * * Black Caribbean 27.5 24.4 25.0 17.5 Black African 20.7 14.1 30.6 13.0 Source: SARS 2001, respondents in employment, aged 30-44 and living in England and Wales.

Mean hourly earnings Men Women

Born outside UK

Born in the UK Born outside UK

Born in the UK

White British £15.41 £12.55 £10.61 £9.31

Other white £16.43 £13.42 £12.55 £11.12

Dual ancestry – white and Black Caribbean

* * * £10.78

Indian £13.74 £12.50 £9.65 £9.48

Pakistani £9.31 £11.31 £8.37 £9.25

Bangladeshi £6.80 * * *

Black Caribbean £10.24 £11.61 £9.05 £10.17

Black African £10.08 £11.84 £8.67 £11.03

Source: Pooled LFS 2001-2004, respondents in work aged 30-44 living in England and Wales.

Ethnic minorities benefit from higher education but at all levels of education have higher unemployment than the white British Men Women

White British

First generation Non-white

Second generation Non-white

White British

First generation

Second generation

Level 4 or 5

2.3 6.5 5.9 2.1 6.6 5.5

Level 3 3.4 10.0 8.7 3.0 9.3 7.1

Level 2 3.8 10.3 10.5 2.9 9.1 7.5

Level 1 3.7 10.5 10.3 3.8 9.3 8.6

Other 5.4 11.0 15.6 6.1 11.3 8.6

None 10.7 16.1 23.7 8.3 12.6 17.6

Ethnic penalties in unemployment

Men Women

Black African -1.03 (.13) -.96 (.14) Black Caribbean -.91 (.10) -.87 (.11)

Black mixed -.81 (.16) -.73 (.17) Indian -.22 (.11) -.50 (.11)

Pakistani -.84 (.11) -1.15 (.13) Bangladeshi -1.04 (.15) -.71 (.24)

Chinese -.11 (.22) -.30 (.23) British, Other

Whites

0 0

Born overseas .15 (.09) .04 (.10)

Born in Britain 0 0 Source: LFS 2001-2004. Model controlling for ethnicity, generation, qualification, age, age squared, marital status, year of survey and region.

Predicted probability of unemployment - Men

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

no/primary qual lower sec full sec lower tert upper tert

British African1 Caribbean 1 Indian1 Pak/Bang1 Caribbean2 Indian2 Pak/Bang2

Predicted probability of unemployment - women

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

no/primary qual lower sec full sec lower tert upper tert

British African1 Caribbean 1 Indian1 Caribbean2 Indian2

Unemployment - conclusions

• All visible minorities apart from Chinese experience ethnic penalties in finding work

• No sign that these penalties are reduced in the second generation

• These penalties operate at all educational levels

• Discrimination is possibly a major factor

Discrimination

There are many different mechanisms that generate discrimination.

• Direct versus indirect discrimination by employers

• Statistical discrimination, error discrimination, tastes for discrimination

• Chill factor or prejudice from co-workers

In practice hard to distinguish.

Methods for assessing presence of discrimination

• Statistical analysis – control for other processes and discrimination is the unexplained gap.

• Self-report studies of job refusals.

• Field experiments (audit studies).

HOCS 2003 on self-reported discrimination

May I check, in the last five years, have you been refused or turned down for a job?

• [IF YES} Do you think you were refused the job for any of the reasons on this card?

• Your gender• Your age• Your race• Your religion• Your colour• Where you live

First-generation ethnic minorities report higher rates of job refusals than the white British

Has been refused

job on non-racial grounds

Has been refused job on racial

grounds

Overall reported refusal rate

White British 23.0 0.3 23.3 Indian 16.8 7.2 24.4 Pakistani 25.4 9.4 34.8 Bangladeshi 23.0 5.7 28.7 Black Caribbean 17.7 7.1 24.8 Black African 24.9 21.9 46.8 Source: HOCS 2003, non-UK born men and women aged under 45 resident in England and Wales).

Second-generation ethnic minorities report even higher rates of job refusal than the first generation Has been

refused job on non-racial grounds

Has been refused job

on racial grounds

Overall reported

refusal rate

White British 23.0 0.3 23.3 Indian 31.2 9.5 40.7 Pakistani 32.3 7.1 39.4 Bangladeshi 22.9 12.5 35.4 Black Caribbean 25.1 11.3 36.4 Black African 33.8 18.9 52.7 Source: HOCS 2003, UK-born men and women aged under 45 resident in England and Wales.

Self-reported job refusals explain around one-third of the ethnic penalties

Model 1 Model 2

Ethnicity

Black African -1.17 (.42) -0.73 (.44) Black Caribbean -1.32 (.19) -1.07 (.21)

Black mixed -.47 (.48) -0.04 (.54) Indian -1.36 (.22) -1.01 (.23)

Pakistani -1.43 (.27) -1.29 (.29) Chinese -1.60 (.64) -1.06 (.80)

British Whites 0 0 Job refusals

Racial grounds 1.39 (.12) Non-racial grounds 1.54 (.19)

None 0 Source: HOCS 2003, second generation

Conclusions

There is a pressing need for new field experiments to investigate discrimination.

Statistical evidence suggests that

• There is a large ethnic penalty that is unexplained by standard variables

• Self-reported discrimination accounts statistically for around one-third of the penalty

A final thought

We may be in the position of the early statistical analyses of the relation between smoking and lung cancer: we do not have proof of a causal connection, but the evidence strongly points in a particular direction. Policy would be wise to move in the same direction.