Discrimination costs the UK £127 billion a year
Rachel Muller-Heyndyk, February 21, 2018
Discriminatory practices at work are costing the UK economy £127 billion in lost output each year
An analysis of more than 500 workplaces by the Centre for Economics and Business Research (CEBR), commissioned by diversity membership organisation INvolve, uncovered a significant positive correlation between diversity and financial performance.
The most diverse workplaces (in terms of gender, ethnicity and sexual orientation) are 12% more likely to outperform industry averages than the least diverse businesses, according to the study. The research also found that companies with a well-developed diversity policy outperformed the national industry average by 15%.
The study found that discriminatory practices resulted in pay gaps and low productivity. Discrimination and pay gaps typically lead to lower productivity and compromised financial performance because the potential of employees is not being fully harnessed and utilised, the research stated.
Gender-based workplace discrimination was found to cost the UK economy up to £123 billion in lost output. Meanwhile, white workers were less likely to experience discrimination than almost all other non-white ethnic groups, costing the economy a relatively small £2.6 billion.
Even when controlling for education levels this pay gap is still prevalent, with white people earning on average £67 to £209 more per week compared to similarly-qualified individuals of another ethnic background. The pay gap around sexual orientation indicates a loss in output worth £2 billion each year.
Suki Sandhu, founder and CEO of INvolve, said: "Business is led by its bottom line. The report 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.”
Christian Jaccarini, an economist at the CEBR, commented: "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. 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."