How can companies cut the UK's class pay gap?

How can companies cut the UK’s class pay gap?

Professionals from poorer families earn almost £7,000 less per year than those from wealthier ones, despite businesses claiming to act on social mobility

Justine Greening arriving in Downing Street

Last modified on Tue 26 Jun 2018 10.06 EDT

It’s no surprise that social class can affect your life chances, but recently the education secretary highlighted the problem with a stark statistic.

Children who show signs of low academic ability at the age of five, but who come from high-income families, are 35% more likely to become high earners than those who show signs of high ability but come from poorer families, said Justine Greening.

It was the latest reminder of the enduring impact of an individual’s family background on their long-term prospects. In January, research by the Social Mobility Commission showed that, on average, professionals from poorer families earn almost £7,000 a year less than those from wealthier backgrounds.

Social mobility is often considered an educational issue, but it is clear from the Commission’s findings that employers have a big role to play too. Not only do rich people get a disproportionate number of top jobs, but inequality also exists among colleagues with exactly the same role, education and experience. On average, those from poorer families will earn 7% less than their peers, equivalent to around £2,242 a year.

A range of theories have been advanced to explain the gap, including education differences, access to networks and class discrimination, as well as other, more specific factors. For instance, the Social Mobility Commission said that people from poorer backgrounds are less likely to ask for pay rises and sometimes even exclude themselves from promotion out of a fear of not fitting in.

Stefan Stern, director of the High Pay Centre which campaigns for greater income equality, says businesses need to do more to tackle the problem. “Britain has been struggling with this for such a long time,” he says. “There are occasional shifts and improvements, but it’s such a long-term, deep-seated thing – and it’s not clear to me that it’s getting any better.”

Plenty of businesses claim to be making an effort. In fact, more than 190 employers have signed up to the government’s Social Mobility Business Compact scheme, which aims to “address elitism and improve social mobility by encouraging businesses to open up opportunities to everyone”.

As one of the lead signatories, Deloitte has introduced new ways to broaden out its recruitment. “We strongly believe that a person’s background shouldn’t dictate their future,” says Emma Codd, managing partner for talent. “A socially diverse workforce is a critical business and economic imperative and we believe that we have an important part to play.”

Among other initiatives, Deloitte has introduced a policy of university-blind recruitment, to try to minimise any elitist bias. And, since 2015, it uses so-called “contextualised academic data”. The idea, it says, is that qualifications are considered in parallel with the circumstances they were attained in. So, for instance, three Bs at A Level would be recognised as exceptional if the school average was three Ds.

Just pay more

Despite official backing for such schemes – the government has granted ‘champion’ status to Deloitte, Linklaters, Telefónica and a number of other firms pledging to increase opportunities for people from lower-income backgrounds – some observers are sceptical about their potential to tackle the class pay gap.

“The real test is not just who they recruit, but who’s there five or 10 years later and what’s happened to them,” says Stern. “It’s a systemic problem, and short-term and PR measures aren’t going to change anything.”

Lee Elliot Major, CEO of the Sutton Trust, a thinktank focused on social mobility, agrees. “We seem to be going backwards in the workplace rather than forwards. It’s not just wages, it’s also whether the jobs have progression in them. We’re almost going back to Victorian times in terms of inequality and opportunity.

“Companies need to think not just about access into the workplace, but how [employees] progress thereafter.”

As a starting point, says Katherine Chapman, director of the Living Wage Foundation, businesses can help social mobility simply by paying better wages to lower-paid workers. With less stress about how to make ends meet, it can be easier to concentrate on securing the next career step or promotion, she argues.

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