Collecting ethnicity data for the pandemic taught City diversity chiefs hard lessons
During the pandemic, Covid-19 was believed to have higher mortality rates for people from ethnic minorities, but a lack of accurate data meant we couldn’t fully understand how deep the problem went. We face the same problems in the corporate world, writes Sophie White.
Never has diversity and inclusion been so high on the agenda of financial and professional services firms (and diligent HR teams). How advanced firms are on their D&I journey is key to mapping the way to their destination. However, in analysing the data from the Covid-19 pandemic, the Office for National Statistics hit on a sore point: the recording of ethnicity data against different categorisations is inconsistent, which means it is difficult to compare like for like when firms and regulators seek to track progress.
In an analysis published last month, the ONS talked about issues faced when researching the disparate impact of Covid-19 mortality rates on ethnic minority groups, which was adversely impacted by the inability to collate reliable ethnicity data with a consistent definition.
Could the difficulties faced by health researchers similarly account for the low rates of firms collecting ethnicity data beyond recruitment stages, and the low levels of firms voluntarily publishing ethnicity pay gaps?
The government pendulum on publishing ethnicity pay gaps has swung from side to side. Its current momentum is towards simply encouraging firms to do so and it is expected that, at some point, it will provide guidance. However, despite two private members’ bills and a debate in Parliament as a result of a petition, the government still does not intend to make publishing ethnicity pay gaps compulsory.
In financial services, further guidance is awaited but currently firms are in “limbo”. However, it is crystal clear that regulators view D&I as a key indicator of good culture.
Financial services firms are also aware that the FCA, the PRA and the Bank of England intend to introduce some form of regulation to drive D&I progress as a means of improving culture and preventing “groupthink”. However, we are yet to see their delayed consultation paper on D&I.
According to the FCA, detailed ethnicity data from firms found “divergent outcomes for different ethnic minority groups”, presumably on aspects such as progression and retention as well as pay. Consequently, consistency in the subcategories of data collected across the industry will be key, so that true impacts and like-for-like analysis can be undertaken – a point that the ONS consistently makes – not just in relation to ethnicity, but also other protected characteristics (and wider data sets like socio-economic data). Firms are keen to improve data collection but they understandably want to do so against consistent data.
While regulators consider formal rules, there are a number of questions to consider. Should firms use the UK 2021 census categories to collect ethnicity data? Does this risk skewed results, with 19 categories resulting in low numbers and the risk that, in smaller firms, confidentiality of pay data (where only a handful of people are within a certain ethnic group) may become an issue? Should firms collect data from all protected characteristics in the Equality Act, just some or go beyond the areas the Equality Act covers? Does the Financial Services Skills Commission’s Social Mobility toolkit, with its very specific questions on socio-economic status, help? Most importantly, is waiting for the regulators’ consultation paper delaying firms’ efforts to improve diversity data collection?
In a telling concession, the CIPD’s 2021 Guide for UK employers on voluntary ethnicity pay reporting simply split the data into two groups – comparing pay only between white and ethnic minority employees. Ethnicity is not a binary issue and so this approach is easy to criticise, but perhaps the belief was that a simple route has a greater chance of being used by more businesses.
Financial services firms will not get away so lightly, and law firms already have to report diversity data in some depth. Yet until the financial services regulators introduce consistency with rules, firms could face undoing work they have started in good faith.
Setting the final destination is relatively straightforward – actually recording the correct data is where the hard work lies. If firms don’t collect and record the data consistently across the board, they stand a strong chance of getting lost along the way.