Action needed: Persistent ethnic inequalities in the labour market By Helen Barnard, Rachel Gomez and Max Williams The UK’s labour market is deeply unequal. Employment levels, unemployment and inactivity rates vary enormously across different ethnic groups and have done for many years. And the charities and community groups with some of the greatest potential to make a difference to this inequality are woefully under-resourced. Employment is highest among the White and Indian groups, with nearly eight in 10 people in work. For those from Black African, Black Caribbean and Black British backgrounds, this falls to just under seven in 10. Employment for those from Pakistani and Bangladeshi groups is at or under six in 10. Lower employment is partly explained by higher numbers of people being ‘inactive’ – not in or actively looking for work because they are students, or they are sick, or because they are caring for children or other adults. For example, people from Pakistani and Bangladeshi backgrounds are much more likely to report limiting long-term illness and poor health. The Covid-19 pandemic also disproportionately affected ethnic minority communities, with higher infection and mortality rates than the White population. Several ethnic minority groups also include more students than the majority White population, increasing inactivity and reducing employment rates. The big differences in unemployment rates – people looking for work and unable to find it – are an even greater cause for concern. Just prior to the pandemic, unemployment was at 3.5% among the White population and 3.9% for adults from Indian backgrounds. The rate for those from Black African, Black Caribbean and Black British backgrounds was more than twice as high at 8.7%, with rates nearly as high for the Pakistani (7.9%) and Bangladeshi (7%) groups. During the pandemic, there were sharper rises in unemployment for people across ethnic minority groups when compared with the White population. These rates fell, but remain much higher than before the pandemic, especially for those from Black, Indian, Bangladeshi and mixed or multiple ethnic backgrounds. Previous research has shown that unemployment not only tends to rise faster and higher in recessions, but also has greater long-term impacts on employment and pay for people from Black, Pakistani and Bangladeshi backgrounds than for other groups of workers. One major factor contributing to this is racism within the labour market. In 2019, a study found that ethnic minority applicants had to send 60% more applications to get a positive response from an employer compared to a White British person. This persistent labour market disadvantage can also be seen in greater insecurity and lower pay among ethnic minority workers. Research by the TUC found that one in 13 ethnic minority workers were in insecure work, rising to one in eight Black employees – compared to an average of one in 17. Pakistani workers are paid 16% less than White British workers and Bangladeshi workers 15% less. Lower quality jobs put these workers at higher risk of unemployment, as well as trapping far more of them in in-work poverty than is the case among other groups. All of this means that as we move on from the pandemic, we need to act quickly and effectively to ensure the UK’s recovery benefits people from these ethnic minority groups, who were already disadvantaged and have experienced some of the heaviest impacts of the pandemic. Central to this are the charities providing support for people who face the highest barriers to getting good jobs, particularly those working with people in ethnic minority communities. However, there is long-term underinvestment in this part of the social sector. In 2015, Voice4Change research found that there was one mainstream charity per 343 White UK citizens, but only one Black and minority ethnic-led charity per 550 ethnic minority citizens. Black and minority ethnic-led charities also had lower annual incomes – an average of £78,960, compared to £142,439 for the charity sector as a whole. Last year, research by Social Investment Business found that organisations led by people from Black and minority ethnic groups were smaller and less financially resilient than the average charity and were also more exposed to the financial difficulties caused by the pandemic. Surveys by the Ubele Initiative suggest that during the first year of the pandemic, 87% of Black and minority ethnic-led small organisations were at risk of closing – compared with only 10% of the charity sector overall. These charities are also mainly based in areas of higher deprivation – making them especially vital sources of support, but meaning that their local populations have less spare cash to contribute to fundraising. Over the last couple of years, there has been greater attention and funding directed towards this part of the social sector. But much of it was short-term emergency funding, rather than a shift to create long-term sustainability. The response to the funds that were set up demonstrated starkly how much more needs to be done. Resourcing Racial Justice, a UK-wide tailored fund launched in 2020, had over 1,400 applications and could only support about 3%. Voice4Change’s emergency fund for Black and ethnic minority charities was nearly seven times oversubscribed. As the economy recovers, returning to the pre-Covid labour market is not good enough. We need to rebuild a labour market that provides far better opportunities to people in those Black and minority ethnic groups who have long faced disproportionate barriers to getting good jobs. That will require sustained policy focus from government, changes to employer attitudes and behaviour, and the vital support provided by charities serving Black and minority ethnic communities.