Ethnic minorities and the labour market in the UK
This thesis explores the labour market activities of British ethnic minorities. The focus is on employment, earnings and public versus private sector employment. Each of the chapters deals with a separate but inter-related topic. The literature offers a number of explanations of ethnic minority’s labour market disadvantages vis-à-vis the white majority. For example, in the case of immigrants, the assimilation theory blames imperfect transferability of labour market skills from the origin to the host country. This theory then predicts a decline in ethnic minorities’ labour market disadvantages with time. However, some unresolved issues still remain. For example, in the case of the UK, why are earlier immigrant ethnic groups (Caribbeans), a significant proportion of which were born in the UK (and, therefore well assimilated) still more disadvantaged in terms of high unemployment rates compared to the more recent immigrant groups such as Indians? This is the main motivation of this thesis, to look into determinants of labour market success. The first part of the thesis quantifies ethnic minorities’ labour market disadvantages in terms of unemployment rates, earning and occupational attainment as measured by the number or proportion of ethnic minorities in professional or managerial posts and reviews the existing literature concerning ethnic minorities. The second part looks at four themes in relation to ethnic minorities’ labour market outcomes. The empirical analysis is carried out using two datasets: QLFS and FNSEM. The main findings are as follows: - After controlling for the endogeneity between employment status and living in a high own ethnic concentrated area, we find that ethnic enclaves have a varied impact on the probability of employment. For some groups, (Indians), living in enclaves has positive effects on their employment probability whilst for others (Caribbeans) there is a negative effect. These findings are partly consistent with earlier findings by Clark and Drinkwater (2002) in which they concluded that ethnic enclaves do not offer many economic benefits to their residents. However, the main message from our study is that such generalisations (or homogeneous treatment of ethnic minority groups) may be misleading. - Having “oppositional” identities adversely impact upon ethnic minorities’ labour supply. Where a community or group is socially excluded from a dominant group, some individuals may identify with the dominant culture and others may reject that culture. Using several aspects of self-identification such as being British and minding inter-marriages, it is found that in most cases having such oppositional attitudes is associated with a lower employment probability. - Using the stochastic frontier estimation method, it is found that, on average, workers in the UK labour market are able to earn 81% of their potential income. However, non-whites are less efficient in converting their human capital into earned income. Being a foreign-born non-white significantly increases inefficiency but this inefficiency declines with period of stay. The lower efficiency levels among ethnic minorities are linked to direct labour market discrimination and the job search method used by these groups. Furthermore, assuming no labour market inefficiency, non-whites hourly earnings are 3-3.7% lower due to direct labour market discrimination. - In line with earlier work, there is a marginal over-representation of ethnic minorities in the public sector than in the private sector. Specifically, it is confirmed that ethnicity plays a part in the employment sector choice, particularly for blacks. While the public-private sector expected wage differentials matter for whites in their employment sector choice, this variable seems to have no clear effect on ethnic minorities’ sector choice.