Many of Britain’s professional workplaces share a shameful secret. Working-class employees are paid an average of £6,718 a year less than those from better-off backgrounds even when they are doing the same job.
Those on the receiving end of this class pay gap are being hit by a double whammy as the cost of living crisis also eats into their incomes. Employers and the government need to take urgent action on both to stop hundreds of thousands of workers from being undervalued and underpaid.
The data could not be starker. Research sponsored by the Social Mobility Foundation, which I chair, has revisited the work of academics Sam Friedman and Daniel Laurison to calculate the class pay gap at 13%. In other words, people from underprivileged backgrounds who have made it into professional employment may as well be working 13% of the year for nothing. That is nearly one day for each seven-day week.
Putting it another way, it means that from tomorrow, which is Class Pay Gap Day, professionals from working-class backgrounds effectively stop earning for the rest of the year. The gap is even wider – more than £8,000 – for CEOs, finance managers, management consultants and solicitors.
Depressingly, the research found that when gender and ethnic differences were taken into account those from a working-class background face a “double disadvantage”. Working-class women are paid £9,450 less than their male colleagues, even when they are both working in higher professional-managerial positions. The study also found that people of Bangladeshi and black Caribbean heritage are paid £10,432 and £8,770 less respectively than their white peers in the same jobs.
This class pay gap is not just an indictment of professional employers. It is morally unjust and economically illiterate. Britain’s professions are a cornerstone of the modern economy. In 2021, service industries contributed £1.7tn in gross value added (GVA) to the UK economy, 80% of the total figure. Britain’s success in the global economy relies on the very best people, regardless of their background, being attracted, not deterred, from working in the professions.
A fair day’s pay for a fair day’s work is the least anyone should expect. When this progressive principle is undermined, people feel their efforts are not rewarded, resentment grows and with it the risk of yet more social division.
Thankfully, some employers are taking pre-emptive action. The likes of Clifford Chance, KPMG and PwC all now publish their class pay gap data. Some are setting targets to drive their progress, recognising the positive impact that reducing class inequality can have on a company’s culture and, ultimately, its business performance. But for now, they are in a minority. Many more businesses should be following suit. This is where the government can help.
The introduction of recognition of the gender pay gap into UK law was a historic and effective moment in women’s fight for gender equality. Since April 2017, organisations with 250 or more employees in England, Scotland and Wales have been obliged to publish their gender pay gap figures annually.
The publication of this data has highlighted the alarming, unacceptable chasm between the average earnings of men and women. It has put the issue on the corporate agenda and the worst performing employers under the spotlight. The legislation seems to be having a positive impact. Among all employees, the gender pay gap decreased to 14.9% in 2021 from 17.4% in 2019.
It is time for the same approach to be taken to closing the class pay gap. Just as it did for the gender pay gap, the government should launch a consultation on creating a legally based register for class pay gap reporting. The fact that gender and racial inequality remain big problems should not blind either employers or the government to the need for action to also close the class pay gap.
At a time when incomes are being squeezed, such a legal change can be a part of the solution to combat the cost of living crisis. It would be an important step towards creating more of a level playing field for those from disadvantaged backgrounds. The class pay gap is a major barrier to inequality and social mobility. It is time to close it.