Discrimination and Poor Diversity costs UK Economy

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A new report reveals how discrimination in workforces cost the UK economy around £127 billion. It creates a worrying picture of how widespread the issue of bias and poor levels of diversity is in workplaces.

Discrimination remains a prevalent concern in the UK and causes huge financial consequences for its businesses. This is the message delivered by a new report, finding that the issue is costing the country’s economy £127 billion.

Centre for Economics and Business Research (Cebr) created the report to investigate whether companies are truly engaging with diversity. Commissioned by INvovle, an organisation that celebrates diverse workplaces, the report was published on 22nd February 2018.

Cebr analysed a total of 500 workplaces during their research. Out of the cost, they found different types of discrimination that contributed to the staggering amount. This is split between:

  • Gender – £123 billion
  • Ethnicity – £2.6 billion
  • Sexual Orientation – £2 billion

Within all three areas of discrimination, they found large pay gaps. In terms of ethnicity, Cebr discovered that significant pay gaps were almost in favour of non-ethnic people. They found that these individuals earn an average £67-£209 more per week than those from ethnic minorities.

However, they did find staff from mixed ethnic backgrounds have average earnings of £152 more than non-ethnic counterparts.

Looking at gender, women generally earn 20% less than men – leading to the high proportion of the total cost. In addition, discrimination in sexual orientation has contributed to a pay gap worth £2 billion.

Amongst their findings, the Cebr also found a direct correlation between an organisation’s diversity and their financial performance. This means the more diverse a company is, the likelier they will generate better profit.

The UK’s most diverse workplaces can perform financially better with industry averages by 12 percentage points, compared to less diverse companies. In addition, those that adopt policies that focus well on diversity are also likely to outperform better by 15 percentage points.

As a result, the report highlights hows workplaces are still plagued by discrimination and how they can lose out financially. Yet, the correlation between diversity and performance truly illustrates the vast benefits of inclusion.

Involve’s CEO Suki Sandhu said: “Business is led by its bottom line. The report we’ve released today is a timely reminder of the crucial role a diverse workforce plays in business success. The economic rewards speak for themselves, and the social ones are equally invaluable.

“In the current climate, where the fight for equality and balanced representation is being fought on many fronts every day, we need businesses to stand up and work to drive change in our society and our workplaces; to ensure that everyone, no matter their gender, heritage or sexuality, is given an equal opportunity to thrive and reach their full potential.”

Economist of Cebr Christian Jaccarini also added:

“Firms seeking a competitive advantage ought to consider both how they can achieve a more diverse workforce and what pro-diversity policies they can put in place, as our research shows that the most diverse firms and the most pro-diversity firms are more likely to be top performers in their industries.

“Similarly, although the UK is more diverse than ever, discrimination is still costing the economy enormously. In fact, our upper-bound estimate finds that UK GDP would be around 7% higher if workplace discrimination based on gender, sexual orientation and ethnicity was eliminated. At the economy’s current rate, that growth would take just under four years to achieve.”

Back in 2017, the McGregor-Smith review revealed similar results in that diversity can help workplace growth. It also suggested that the UK Gross Domestic Product (GDP) could increase by 1.3% each year.

Now with the Cebr report, it’s clear that diversity can provide profitable benefits. Without it, companies are at risk of creating pay gaps – which leads to the cost £127 billion in the UK economy.

In order to thrive, businesses now simply cannot afford to lose focus in creating diverse workplaces.