Ethnic inequality is widespread and a drag on the global economy

Ethnic inequality – the political and economic disadvantages felt by racial minority groups – persists across the globe. Not only is such discrimination unfair, it is a drag on global economic growth, and will not go away by itself.

Inequality affects two main groups of ethnic minority populations. Long-term settled communities, which often pre-date the boundaries of nation states by many centuries, are more commonly found in Asia and Africa. One example is the Dalits in India – though Roma populations in eastern Europe and Scottish people in the UK are other examples. More recent minority populations, which have mainly arrived through migration in the past century, are usually found in Europe: Bangladeshi people in Britain, for example.

Both groups suffer discrimination, and policymakers around the world are not doing enough to counter it.

Developing nations: India

India is a country with persistent ethnic inequality. While poverty in general is declining, poverty rates are generally higher for certain groups [pdf], namely Adivasis (or ‘tribal’ people, 45% of whom live in poverty in rural areas and 27% in urban areas), Dalits (former untouchables, 34% of whom live in rural poverty and 22% in urban poverty) and Muslims (27% rural, 23% urban). The poverty rates among upper caste Hindus for 2011/12 were just 16% in rural areas and 8% in urban areas.

Across the world there is a link between ethnicity and occupation, with certain jobs not only viewed as low status, but also lower paid and with fewer rewards. The Indian caste system is perhaps the most notorious example. While the caste system has clearly changed over the past few decades – with the practice of extreme segregation associated with untouchability banned in 1950 – Dalits are still much more likely to clean toilets than other groups and very unlikely to cook for an upper caste Hindu.

India has made some attempt to address ethnic inequality: Dalits, adivasis and other disadvantaged classes (but not Muslims) benefit from a systematic form of affirmative action – quota systems – in political representation, access to education and public sector jobs.

Countries all over the world, including Malaysia, Rwanda, South Africa and Iraq, have implemented such forms of positive discrimination to improve the representation of minority groups – most notably in terms of political representation, and particularly in post-conflict scenarios.

But it is not enough. Even if minority groups get access to political power, this doesn’t always undermine economic inequalities. Often the number of posts is too few to benefit the whole group, and economic control still resides in the hands of a small elite, who are unlikely to share their riches with people from a different ethnic group.

While developing countries starting from a low economic position may be able to paper over these economic inequalities initially, the poor performance of ethnic minorities will gradually become a drag on the economic performance of the country as a whole. It may also become a challenge for effective democratic governance, where minority groups can legitimately feel that “power to the people” merely empowers the majority to control the most valuable aspects of the economy.

Political representation is indeed a necessary first step, but the participation of ethnic minority groups cannot be equal, even in political terms, unless economic policies – such as India’s relatively successful targeted poverty alleviation measures – also address ethnic inequalities.

Developed nations: the UK and Europe

The economic and political problems caused by ethnic inequality are not limited to conflicts in Africa or the caste system in India. In most European countries, new migrants often work in insecure or even exploitative conditions, and in low-paid jobs that the native-born population may deem too lowly to perform – not a million years away from those Indian high castes who refuse to clean toilets.

It seems in many cases even next-generation European-born ethnic minorities do not escape from this low-pay trap. Unfortunately in most European countries we do not have comprehensive data on ethnic inequalities: the French perspectivethat collecting such data reinforces segregation is sadly affirmed in other countries, including Sweden.

We do know that in the UK there is a 12% employment gap between white British and ethnic minority people. This amounts to around 500,000 “missing” workers in the UK labour market. Figures from the Department for Work and Pensions show a jobless rate of 45% in 2013 for young black, Pakistani and Bangladeshi workers, with a figure of 19% for white people. Other European countries are experiencing similar challenges, whether in terms of low wages and discrimination towards new migrants, or the continuing effects of this discrimination on second and now even third-generation European-born ethnic minorities.

Such ethnic inequalities will not simply go away by themselves, though it appears Treasury estimates for future UK economic growth assume they will. If inequalities persist at current levels, an 11% ethnic employment gap will amount to one million “missing” ethnic minority workers when ethnic minorities make up 30% of the UK population in 2051. This would be a significant drag on economic performance, with reduced tax contributions and increased benefit payments to an already ageing population. Policymakers are too complacent if they think inequalities will simply disappear with new generations of ethnic minorities.

As well as ensuring that education, training and policies such as apprenticeships actually reduce ethnic inequalities, European governments should also take the lead in their own employment policies and public pronouncements. They should do more to listen to and encourage employers to hire a diverse range of skills and experiences, and consider putting targets for ethnic minority representation on boards, something that has proven successful in the case of gender. It’s important to recognise the benefits of positive discrimination in the labour market, rather than view legislation to combat inequality as red tape or political correctness.

Ethnic inequality is a problem that affects developing and developed nations, albeit in different ways, and policymakers everywhere must do much more to tackle it. Global economic growth and the stability of our democracies depend on it.