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Jobs deficits , neighbourhood effects and ethnic penalties-explaining labour market inequalities of ethnic minorities CCSR Working Paper 2006-12

The reduction of inequalities in the labour market both between ethnic groups and between different local areas is a priority for many governments because it indicates improved access to jobs and a diverse workforce is socially desirable. In this paper, we construct a unique evidence base of labour market circumstances at the neighbourhood level. We use the 2001 Census data for England and Wales, together with information on local characteristics and observed employment rates. We examine the impact of age, sex, birthplace and educational qualifications on the employment of ethnic minorities nationally and compute locally expected employment on the basis of these relationships and local characteristics. Our analysis demonstrates that 1.1 million new jobs are required to bring every ethnic group in every locality up to the average England and Wales employment rate. Ethnic group accounts for most of this jobs deficit. Local variation in demographic composition and human capital account for a smaller proportion of the jobs deficit. Neighbourhood effects have both a geography common to each ethnic group (for example a gradient of higher jobs deficits in the Midlands, the North of England and Wales), and some group-specific characteristics (for example more favourable outcomes for Pakistani and Bangladeshi groups in the North than might have been expected). The findings have far reaching implications for employment policies aimed at improving the labour market circumstances of ethnic minorities. The evidence base is a public resource which can be used to investigate local outcomes and to prioritise remedial action.