Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is a senior economist at the OECD
The decade leading up to the pandemic brought significant progress for workplace diversity, but not all groups have benefited equally.
Virtually all nations in the OECD group of countries have reduced gender and age gaps in employment. At the same time, acceptance of LGBT+ people has increased. And corporate policies are increasingly focusing on migrants and ethnic minorities.
Women have been by far the biggest targets of diversity policies. In a recent OECD-wide survey of HR professionals, one in 10 companies said they had set targets to interview a minimum number of applicants from an under-represented group — their main targets being women (76 per cent), disabled people (39), ethnic minorities (30) and migrants (19). Evidence from the US shows that the positive effect of such affirmative action has been strongest for white women, while there was much less impact on black men, black women or Hispanics.
But, despite progress for many groups, the decade has brought no visible advancement for those at a socio-economic disadvantage.
Initial evidence suggests income inequalities have been further exacerbated by the pandemic. However, even when looking at pre-pandemic levels, the data showed it could take five generations before a child from a poor family would reach the average income. And yet socio-economic background is rarely considered in corporate diversity efforts.
It is useful to acknowledge that while there are societal gains from greater inclusion of diverse groups, the diversity business case for individual companies is less evident.
While the impact of diversity on company performance has often been studied — notably with respect to migrant and ethnic diversity — solid empirical evidence is mixed as to what degree it actually enhances the corporate bottom line.
A more diverse workforce is said to foster different viewpoints and ideas, enhancing innovation and problem solving. But the flipside is that there is potentially a risk of lower productivity resulting from communication difficulties.
For example, in a 2017 study, teams of participants from different countries produced a lower output and productivity than groups with more homogeneous countries of origin.
Diversity is a multi-dimensional concept, though, encompassing many different groups and their intersectionality. This makes quantifying its effect extremely difficult.
Two people who differ in their origin or ethnicity, for instance, but who have an otherwise privileged background may not have different views and ideas from one another. On the other hand, contrasting perspectives may be starker between people from the same ethnic group who have grown up under widely differing socio-economic circumstances.
One might be tempted to say that addressing other types of disadvantage reduces socio-economic disadvantage, rendering such consideration unnecessary. Yet this might not be the case.
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Companies’ easiest route to diversification is “cream skimming” across different groups. A review of the literature in a 2020 OECD study suggested that policies that focused on ethnic minorities, without paying attention to socio-economic disadvantage, tend to favour better-off individuals from that group.
Likewise, evaluations of gender quotas in corporate boards suggest no impact on the advancement of women at lower levels.
Policies must therefore avoid the risk of primarily benefiting those who are already relatively privileged.
The absence of attention to socio-economic disadvantage is also evident in anti-discrimination legislation. Whereas virtually all OECD countries prohibit discrimination based on based on gender, race, age, disability, sexual orientation and religion, fewer than half of countries include socio-economic grounds.
Geography also matters. For example, new OECD work suggests the concentration of children of immigrants in schools has been increasing and is often associated with lower educational outcomes.
While our countries become more diverse, many schools and neighbourhoods are not — especially in terms of socio-economic background. This means there are fewer natural contacts between groups that are of both different ethnic and socio-economic backgrounds than one might assume.
Companies need to develop recruitment channels that target those in different neighbourhoods and who have different educational backgrounds than the bulk of current employees.
However, this is not always straightforward, so public policies need to support companies, especially smaller ones, in their efforts to truly diversify their workforce. This can be done, for example, by providing diversity consultants — as previously undertaken in Belgium and currently in Estonia.
Now is the time for companies to show that diversity is not a cosmetic issue. The litmus test for diversity policies will be whether they truly reduce socio-economic disadvantage, in particular within disfavoured groups.
Thomas Liebig is a senior economist at the OECD