The financial impact of racial inequality in the UK

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Money Questions is a series of articles answering our community’s concerns or queries with regards to money, personal finance and other connected topics. If you have a question which we haven’t addressed yet, you can submit it here.

Question: How has racial inequality affected the financial situation of ethnic minorities in the UK?

Between the coronavirus pandemic and the anti-racism protests, the harsh realities of longstanding inequalities based on race have come into sharp focus.

Global attention has rightly fallen on the continued racism embedded in society — and whilst the marches started in America, Britain also needs to face up to both its own history and its current issues when it comes to racial inequality.

From health and education, to housing and employment — systemic racism has ensured that the lives of black people and those from minority ethnic backgrounds have been shaped by struggles to be heard, seen, represented, and supported.

But if Covid-19 has shown us anything, it’s also that money and wealth underpin many of the inequalities related to race in the UK.

The Wealth Gap

There is a significant wealth gap between white people and those from BAME (Black, Asian and Minority Ethnic) backgrounds.

In the UK, black households are the most likely of all ethnic groups to have a weekly income of less than £400.

According to the Child Poverty Action Group, 45% of black children live in low income and materially deprived households compared to 26% of those in white British families; the national average is 12% according to ONS. White Britons are also much more likely to own their own home at 68%, compared to 37% of black Caribbean.

Figures from the race equality thinktank, the Runnymede Trust, reveal that for every £1 of white British wealth, Pakistani households have about 50p, black Caribbean households only have 20p, and black African households have just 10p. This means that minority ethnic people are more exposed when it comes to financial crises like those caused by Covid-19 because they have less in savings.

Employment

When it comes to work, the proportion of black employees in the top quartile of earners is the second lowest for any ethnic group recorded by the ONS at just 16.3%.

However, black and minority ethnic applicants report sending 80% more job applications before being accepted for an interview than white British applicants. There’s been significant research into why this is the case, particularly in CV studies that show people with more “ethnic sounding” names being passed over for interviews and jobs.

On the other side, many BAME people are also in more precarious employment, such as the gig economy. Minority ethnic women, for example, are significantly overrepresented in the health service on set hours — including nurses, care workers and cleaners. Likewise, younger BAME people are also more likely to be on zero-hour contracts (47%) and black African millennials have a 58% greater chance of being unemployed compared to white peers. Interestingly, this isn’t the case across the board as black Caribbean, Indian and Bangladeshi people are no more likely to be out of work than white people.

This has resulted in there being a significantly higher proportion of unemployed people from ethnic communities (6.3%), than there are white people out of work (3.9%).

Education

It’s also worth noting that black and minority ethnic people are more likely to have a university degree than white people.

But, turns out, their degree is worth less in the labour market than that of a white graduate, earning 10% less and seeing a pay gap of 23%. Plus, as illustrated by the Runnymede Trust’s research, nearly 40% of black African graduates are in non-graduate roles, compared to 20% of white British people.

It all piles together, compounding the wealth gap and exacerbating the issues of financial and racial inequality.

Covid-19

When it comes to wealth, the coronavirus pandemic has made it all too apparent where racial inequality exists — with BAME women being hit particularly hard when it comes to the financial and psychological fallout.

A Fawcett Society survey showed that three times as many BAME women as white women reported that they had recently lost support from the government (42.5% versus 12.7%). Moreover, BAME women and men are the most anxious about debt, making ends meet in the near future, and paying either rent or their mortgage. Many essential roles during Covid-19 have been those where BAME representation is particularly high as well, rightly meaning that people from minority ethnic backgrounds are more concerned than white people about the return to work.

Things cannot continue the way that they have been. As a society, we have the technology and resources to address inequality across the board. Plus, in an economy looking for recovery, it’s worth noting that diversity makes us stronger as a country. In fact, equal participation and progression across ethnicities could be worth an additional £24 billion to the UK’s economy per year, according to the Race in the Workplace report.

What can we do to address these racial inequalities in wealth?

  1. Disaggregate the data — For those who haven’t read Invisible Women or Sway, the case for disaggregating data is very simple: if you break out the stats by race, ethnicity, gender, age and so on, then you can really see how certain ideas, issues, illnesses and inequalities impact key groups. You can build better products, develop more effective solutions, diagnose and save lives, and write better policies. Overall, the power of disaggregated data is that it’s the basis of system change and the empowerment of different groups.
  2. Publish the ethnic pay gaps — When it comes to closing the wealth gap, like with gender, we need to hold businesses to account, as well as set standards and goals. But we also can’t conflate all ethnic minorities into one neat figure — they need to be split out and approached separately. It’s already tracked to a degree, but now we need corporates to support equality. Publishing their pay gap reports should be mandatory for businesses alongside gender results. Sign the petition now.
  3. Blind hiring practices — Research shows the biases around hiring, so we need to find ways to remove the bias from the process. Whilst there is no perfect solution yet, removing names and identifying features in resumes could ensure more black and minority ethnic candidates reach the interview stage, and eventually start to close the unemployment gap.
  4. Use our spending power — Anna Lappe said that “every time you spend money, you’re casting a vote for the kind of world you want to live in.” Giving money to fight racism is a way to redistribute power and privilege, particularly as white people tend to have more money than black people. We can buy from black and minority ethnic businesses. We can support black and minority ethnic artists, authors and creatives through Patreon and Kofi, or simply by buying their books or work. Start donating to black and minority ethnic non-profits, grassroots organisations or other initiatives like the legal and bail funds supporting protestors. We can also support companies that are donating to anti-racist causes or supporting the empowerment of black and minority ethnic people through CSR and good hiring programmes.
  5. Educate ourselves — Read books, fiction and non-fiction. Read the research from universities and thinktanks and campaigner groups. Tune into podcasts and radio programmes. Watch shows and films that discuss inequality. Volunteer for key charities and initiatives. Listen to the experiences of exclusion among BAME people, acknowledge their reality, and keep learning. The more we learn, the better we become at being anti-racist. We can all learn more about how to best support black and minority communities, in the UK and worldwide, dismantling racism as we go.

Keep an eye out — more questions and answers to come! In the meantime, submit your question here and we’ll make sure to respond.

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Authors: Harriet Allner and ikigai

Harriet Allner is a writer, blogger and fintech specialist. She cares about stories that matter and is passionate about promoting conversation around money positivity and financial feminism.

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This article is not advice. ikigai is a trading name of Ikigai Invest Services Limited, a company registered in England and Wales (Company number: 12011662). Ikigai Invest Services Limited is registered with the Financial Conduct Authority (FCA) as an EMD Agent (reference number: 902740) of PayrNet Limited, an Electronic Money Institution authorised by the FCA (reference number: 900594) and is an appointed representative of WealthKernel (reference number: 723719) which is authorised and regulated by the FCA. ikigai is not a bank. Registered address: 16 Great Chapel Street, London, England, W1F 8FL.

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