First, at present gender pay gap reporting in the UK only covers companies with more than 250 employees. In practice, this means it covers only around 40% of the UK working population in the private sector.15 To tackle the pay gap comprehensively, this suggests there is a strong case for extending the pay reporting regime to smaller companies – say, those with 30 or more staff. Second, there is currently no compulsory system of company reporting on the ethnicity pay gap in the UK, though the government has consulted on doing so. The ethnicity pay gap is at least as large as for females, and if anything has been more persistent, as shown by the Oaxaca-Blinder decomposition results. In my opinion, there are therefore strong grounds for extending compulsory reporting to ethnicity as well as gender. This analysis also emphasises the importance of looking at labour market outcomes for different ethnic minority groups, rather than necessarily treating ethnic minorities as a single group. Third, at present only a handful of countries internationally require companies to publish gender and ethnicity pay gaps. There is a strong case for reporting diversity pay gaps, on an internationally-harmonised basis, to allow cross-country as well as cross-company comparison. Given their expertise on labour market issues, this might be something on which the OECD could lead. The international central banking community could also help lead by example. The benefits of internationally-harmonised disclosures, as an incentive device for action, have recently been demonstrated in the case of climate change disclosures.
25  All speeches are available online at www.bankofengland.co.uk/speeches  25  Chart 21: Ethnicity pay gap Oaxaca-Blinder decomposition time series  Per cent  15 10 5 0 ‐5  Unaccounted for  Accounted for  ‐10  Ethnicity pay gap  ‐15 1997  1999  2001  2003  2005  2007  2009  2011  2013  2015  2017  2019  Source: ONS Labour Force Survey and Bank of England calculations. Note: A positive ethnicity pay gap in this chart indicates that ethnic minorities earn less than their white counterparts, whereas a negative ethnicity pay gap indicates that ethnic minorities earn more than their white counterparts. The decomposition also helps explain the otherwise puzzling finding of a larger ethnicity pay gap in London than elsewhere in the UK. That larger gap appears largely to reflect compositional effects. Once these are accounted for, the unexplained ethnicity pay gap in London, at 13 percentage points, is similar to the sample average, at just under 10 percentage points, and is about as persistent. An alternative, and more flexible, way of exploring the determinants of pay gaps is by using regression techniques. In our baseline regressions, we use the approach of Goldin (2014) to estimate gender and ethnicity pay gaps. Given the rich set of controls in our dataset, this offers robust estimates of conditional gender and ethnicity pay gaps. It also provides useful insights into the factors, individual and job-specific, most important for driving headline pay gaps.