£7,000 a year – that’s the hit to your salary if you come from a working family | Alan Milburn

Mall UK professional workplaces share a shameful secret. Working-class employees are paid an average of £6,718 a year less than those from more affluent backgrounds, even when doing the same job.

Those who are the beneficiaries of this class pay gap are being hit with a double whammy, as the cost of living crisis eats away at their incomes as well. Employers and the government must take urgent action to prevent hundreds of thousands of workers from being undervalued and underpaid.

The data couldn’t be clearer. Research sponsored by the Social Mobility Foundation, which I chair, revisited the work of academics Sam Friedman and Daniel Laurison to calculate the class wage gap at 13%. In other words, people from disadvantaged backgrounds who have managed to professionalize themselves may as well work 13% of the year for nothing. That’s almost one day for every seven-day week.

In other words, this means that starting tomorrow, Class Pay Gap Day, working-class professionals effectively stop earning for the rest of the year. The gap is even bigger – over £8,000 – for CEOs, CFOs, management consultants and lawyers.

Unfortunately, research has found that when gender and ethnic differences are taken into account, people from working-class backgrounds face a “double disadvantage”. Working-class women are paid £9,450 less than their male colleagues, even when they are both in senior professional managerial positions. The study also found that people of Bangladeshi and black Caribbean descent are paid £10,432 and £8,770 respectively less than their white peers in the same jobs.

This pay gap between classes is not just an indictment of professional employers. It is morally unjust and economically illiterate. British professions are the cornerstone of the modern economy. In 2021, service industries contributed £1.7 billion in gross value added (GVA) to the UK economy, or 80% of the total figure. Britain’s success in the global economy depends on the best people of all backgrounds being attracted, not deterred, from working in the professions.

A fair day’s pay for a fair day’s work is the least we can expect. When this progressive principle is undermined, people feel their efforts go unrewarded, resentment grows and with it the risk of even more social division.

Fortunately, some employers take preventative measures. Companies like Clifford Chance, KPMG and PwC now publish all of their pay gap data. Some set goals to drive their progress, recognizing 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 the minority. Many other companies are expected to follow 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, organizations with 250 or more employees in England, Scotland and Wales have been required to publish their gender pay gap figures each year.

The publication of this data has highlighted the alarming and unacceptable gap between the average incomes of men and women. It has put the issue on the corporate agenda and underperforming employers in the spotlight. The legislation seems to have a positive impact. Among all employees, the gender pay gap narrowed to 14.9% in 2021 from 17.4% in 2019.

It’s time to take the same approach to closing the wage gap between classes. 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 inequalities remain big issues should not blind employers or government to the need to act to close the class pay gap as well.

At a time of shrinking incomes, such a legal change may be part of the solution to tackling the cost of living crisis. This would be an important step towards creating more equal conditions for people from disadvantaged backgrounds. The pay gap between classes is a major obstacle to inequality and social mobility. It’s time to close it.

Alan Milburn is President of the Social Mobility Foundation

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