New Linked Payroll-Census Data Reveal Ethnic Minority and Disabled Workers are Much More Likely to receive Low Pay

For years the Low Pay Commission has used payroll data (the Annual Survey of Hours and Earnings, or ASHE) to assess the extent of low pay, and to assess the impact of minimum wages. But workers’ ethnicity and disability status have never been available – until now.

Using the Census 2011 data linked to the payroll data reveals, for the first time, the share of employees from different ethnic backgrounds on low pay in England and Wales.

Figure 1: Share of employees in England and Wales in low pay work in 2011, by ethnicity and gender

Across England and Wales, 17 percent of employees were low paid in 2011. But the share of low paid employees varies hugely by ethnicity and gender.

Among men, only 10 percent of white employees were low paid. This is also true for Black Caribbean men. The share of low paid was more than three times greater (36 percent) among Bangladeshi men.

Overall, the share of women in low pay is 11 percentage points higher than it is among men (23 percent against 12 percent). However, the prevalence of low pay by sex differs markedly across ethnic groups. Among Whites, Indians and Pakistanis, the incidence of low pay is considerably higher among women than it is among men. However, among Bangladeshis the share of men on low pay is twice as high as it is among women (36 percent compared with 18 percent).

Comparing the incidence of low pay across ethnic groups can be misleading because we are not comparing ‘like’ individuals. But the linked ASHE-Census data help in this regards because they allow us to adjust comparisons across sex and ethnicity holding over characteristics constant.

Figure 2 shows what happens when we compare the probability of being low paid among employees from different ethnic groups with the same levels of education and experience, health and family circumstances.

Figure 2: Effect of ethnicity on the probability of being low paid, by gender, compared to whites (after conditioning on individual characteristics, and family characteristics)

Among men, all other ethnic groups have a higher probability of being low paid compared with white employees with otherwise similar characteristics. In this case, the probability of being low paid is highest among Black African men. Having accounted for differences in education, experience and other circumstances, their probability of being low paid is 11 percentage points higher than that for white men. Bangladeshi men are not far behind.

Among women with otherwise similar characteristics, Bangladeshi employees have the lowest probability of being low paid: it is around 6 percentage points lower than it is for white women. Black African women are most likely to be low paid, on average, when comparing across workers with other similar characteristics.

Of course, ethnicity and sex are not the only relevant factors when assessing employee’s probability of being low paid. For the first time, we have also been able to assess low pay probabilities linked to disability using payroll data. Comparing ‘like’ employees, being disabled significantly raises the probability of low pay among men by 2 percentage points, but has no significant effect among women.

Van Phan, an economist at the University of the West of England, who helped produce the new dataset and figures, says: “Although other data sources can be used to estimate the incident and probability of low pay across ethnic groups, payroll data are particularly high quality because they are provided by the employer. They reveal startling differences across ethnic groups and disability in the experience of low pay, which government and the Low Pay Commission may consider going forwards. In future work we hope to examine the role that occupation, industry, and labour force participation decisions play in generating these differences.”

Notes:

  • This research is produced by the WED team.
  • The estimates reported here are derived by matching the 2011 Annual Survey of Hours and Earnings (ASHE) to the 2011 Census for England and Wales. More recent data are not available, because the Census only comes along once every 10 years.
  • There are 7 ethnic groups, including White, Indian, Pakistani, Bangladeshi, Chinese, Black African, and Black Caribbean. We do not consider the mixed and other ethnic groups.
  • Our definition of low pay is earning below 2/3 median hourly earnings, based on the hours measure used by the Low Pay Commission in its analysis of the impacts of the National Minimum/Living Wage (hrpayx).
  • Our definition of disability is a long-term health problem or disability that limits a person’s day-to-day activities, and has lasted, or is expected to last, at least 12 months (disability).
  • The probabilities of being low paid are based on regression analyses which control for the influence of the following characteristics: age, education (level of highest qualification), marital status, work region, tenure, English nationality, health problem, part-time, number of children, and age of the youngest child.
  • See here for more details of the data, method and results.
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