Huge gaps in household income between different ethnicities persist

By agency reporter
August 9, 2017

Large living standards gaps between different ethnicities persist in Britain, with typical Bangladeshi household incomes being £8,900 (35 per cent) lower than the White British median; Pakistani households £8,700 less (34 per cent) and typical Black African households £5,600 less (22 per cent), according to new analysis from the Resolution Foundation published on 7 August 2017..

These gaps are even larger when housing costs are taken into account. Whereas over half (58 per cent) of White British families own their home, only one in four Bangladeshi, Black and Other White (primarily European) families do. As a result, the disposable income gap between White British households and Bangladeshi households increases to £9,800 (44 per cent) when housing costs are considered.

However, despite these big household income gaps remaining, the analysis shows that they have narrowed in places. Bangladeshi households have experienced the fastest income growth of 38 per cent in real terms between 2001-03 and 2014-16, nearly three times the 13 per cent for the White British group. Pakistani households have also seen catch up growth of 28 per cent over the same period.

The Foundation finds that employment gaps are key to the gaps in living standards and the faster recent growth for some groups. Pakistani and Bangladeshi female employment is very low relative to White female employment (37 and 35 per cent compared to 72 per cent), but Pakistani and Bangladeshi women have seen their employment rate soar by ten and 18 percentage points respectively between 2001-03 and 2015-17, partially closing the gap. Employment rates for Pakistani, Bangladeshi and Black men have also increased substantially, with growth of 10, 17 and 6 percentage points respectively since 2001-03, while the rate among white men has been flat.

In addition, changes in earnings may explain part of the strong income growth of Pakistani and Bangladeshi households. For male employees of other ethnicities as a whole, typical weekly pay grew between 2001-03 and 2015-17 by only one per cent after accounting for CPIH inflation. For male Pakistani and Bangladeshi employees however typical weekly pay, while reaming considerably below the overall median, rose by 28 per cent over the same period.

The Foundation argues that alongside the labour market and housing, demographics have a sizeable impact on the household finances of the different groups. White British and Black Caribbean households are typically older, reflected in home ownership rates and incomes. The average number of children in Bangladeshi and Pakistani households (including those with no children at all) has fallen from 2.1 in the mid-90s to 1.3 two decades later, boosting their measured living standards, compared to a small fall from 0.5 to 0.4 children per White British household.

Looking to the future, while the report does not explore directly the impact of the £14 billion of working-age welfare cuts currently being rolled out on income differences among ethnicities, there are causes for concern. Given that the impact on low to middle income families is set to be very negative, and that some minority ethnicities are disproportionately low income, young and with children, there is a danger of recent progress being undone.

Adam Corlett, Senior Economic Analyst at the Resolution Foundation, said: “Differences in living standards between ethnicities in Britain too often go ignored. This matters because income gaps between different minority ethnic groups and White British households are significant and persistent.

“However, we should be encouraged by the fact that there have been big improvements in some instances, such as the impressive employment gains seen among Black, Bangladeshi and Pakistani men and women. Thanks to this and other factors, since the turn of the millennium Bangladeshi and Pakistani households have actually seen the fastest income growth.”

* Resolution Foundation


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