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P
Pa
November 24, 2020

Financial inequalities between ethnic groups revealed

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P
Pa
November 24, 2020

LONDON: Households where the head is of white British ethnicity are around nine times as likely to be in the wealthiest top fifth in the UK as those where the head is from a black African background.

Families where the head of the household is white British are also 18 times as likely to be in the top fifth – defined as having total wealth of more than £865,400 – as those of Bangladeshi ethnicity, according to the analysis from the Office for National Statistics (ONS).

Its report found differences between ethnic groups in terms of employment, home ownership rates and pension saving – all of which are vital ways for households to build up wealth. The research found that the median average total wealth for households across Britain between April 2016 and March 2018 was £286,600.

This average ranged from £34,000 among those with a household head from the black African group to £314,000 where the head is from the white British group. The ONS said there were statistically significant differences in wealth by ethnicity of the household head, even after adjusting for factors such as age.

Households where the head is black African were found to be twice as likely as the white British group to have financial debts that exceed their financial assets.

Myron Jobson, from online investment service interactive investor, said: “The fact that there were statistically significant differences in wealth by ethnicity of the household head, even after adjustment for a range of household characteristics including age and household composition, shows the extent of the issue.”

He said the Black Lives Matter movement has “reawakened conversations about inequalities that persist in society. It is important that financial inequality is not left out of the broader conversation.” The ONS also said there are relatively high levels of employment among people aged 16 to 64 for white (77 per cent) and Indian (76 per cent) ethnic groups compared with Pakistani (57 per cent) and black ethnic groups (67 per cent). Those from Indian and white backgrounds are also more likely to be employed in higher-paid professional jobs, it said.

Households with an Indian, Pakistani or white British head were found to have the highest net property wealth – with median averages of £176,000, £115,000 and £115,000 respectively, the ONS found. They are also the most likely of all ethnicealth, with 80 per cent (Indian head), 73 per cent (Pakistani) and 69 per cent (white British) of households having net property wealth.

Households in the black African (20 per cent) and Arab (17 per cent) ethnic groups were found to have particularly low home ownership rates.Sarah Coles, personal finance analyst, Hargreaves Lansdown, said differences in average wealth are “the result of a huge number of complex and interlinking factors”.

She said: “Some groups are much younger on average … and, because we build wealth over time, age has a massive influence on wealth.” House price variations also mean that where communities are located in Britain may also hold back people’s ability to buy a home and accumulate property wealth, she said.

Ms Coles added: “However, employment plays a key role too. There are enormous differences in employment – both the likelihood of being employed and the type of profession between different ethnic groups. Lower incomes can make it more difficult to build up wealth, and has a knock-on effect on pension wealth too.”

The ONS also found differences between ethnicities in terms of saving into private pensions. Lower levels of pensions participation were found in households where the head is Bangladeshi (48 per cent) or Chinese (57 per cent).

This compared with 59 per cent for black African-headed households, 83 per cent for Indian groups and 82 per cent for households where the head is white British. Helen Morrissey, pension specialist at Royal London, said the pensions participation gap should come under a sharper focus, to find out if policies are serving some groups better than others.

She said: “While this may partly be explained by differing demographics, with some groups younger on average than others, we do need to take a closer look.

“Why are some ethnic groups more likely to have private pension wealth than others? Are policies such as auto-enrolment serving these groups as well as they should? If not, we need to ask why.”