Misleading claims about economic benefits of Equality Act are endangering jobs
23 Dec 2011 09:47 AM
Contrary to government assurances, new equality rules will have no economic benefit and questionable impact on real inequality
As unemployment continues to grow, a new Civitas report reveals that new equality regulations threaten further job losses.
The Equality Act 2010 introduced new duties on employers to protect disadvantaged groups from discrimination in the workplace and combines existing anti-discrimination law into one act. The Government's official Impact Assessment of the Equality Act claimed that it would produce net economic benefits of £25-£87 million annually and increase access to jobs. But Assessing the Damage, by Nigel Williams, finds that the Government's Assessment relied on a series of spurious assumptions, and that the more probable outcome is job destruction:
The claims for the 2010 Equality Act are immense. There are a few initial costs, followed by massive annual gains; social evils may be reduced while contributing to the economy at the same time. With a little scrutiny, however, the balance of benefits over costs vanishes very rapidly. p.1
The most tenuous argument was to place an arbitrary cash value on an ideological aim. The Impact Assessment calculated that a more equal society was worth £62 million pounds per year. The Civitas report explains:
No money is produced or saved. The estimate is just of the feeling of well-being coming from a belief that differences between people have been reduced. The value is ideological, nothing more. p.1
This puts a thumb on the assessment scale. It makes the Act 'cost-effective' not through evidence, but by definition, since the intention of the Act is to reduce inequality. Williams shows that this argument requires the further assumption that the new equality regulations do, in fact, increase equality. This is far from clear since:
It is unproven that favouring individual members of a disadvantaged group (as the Equality Act allows), actually benefits the disadvantaged members of that group. Instead, advantaged members of a minority group might be in a better position to exploit new opportunities provided by regulation.
Previously enacted equality regulations have failed to make any visible impact on overall equality metrics. p. 2
Illusory benefits - very real costs
While the benefits are illusory or contestable, the costs are very real and likely to be larger than the Equality Act Impact Assessment estimates. The Assessment:
Budgets only £200 million to the costs of familiarising with the new rules. This includes an assumption it would take only 8 work-hours for staff at each small and medium-sized business to read, digest and disseminate 800 pages of new guidance regarding the business' equality duties. p. 3
Suggests that the costs of adapting rental accommodation to individuals with disabilities could be zero, while the benefits could be as large as £10 million. This assumes that no extra work at all can still produce substantially improved accommodation. p. 4
The costs to large firms are also taken to be implausibly small:
Large firms are given close to 24 hours of work each to prepare. Anyone that has attended an Equal Opportunities Awareness or Diversity Training course will be aware that the costs do not stop with the HR department. It is common for much of the workforce to be required to devote working time to learning about the issue. p. 4
In the monitoring loop
These findings emerge following the release of last month's Civitas report into the equalities industry. The Rise of the Equalities Industry estimated that up to a billion pounds a year is spent complying with equality legislation, most of which involves mindless data collection. These equality monitoring exercises are ineffective at reducing inequality, and introduce prohibitive costs to employers when they want to expand their workforce.
The report's author, Peter Saunders, argues that the extra burdens only exist because of poorly considered legislation. The equalities industry is a closed loop, where equality workers collect and pass data to equality officials elsewhere without it ever improving outcomes for the disadvantaged:
The astounding thing about the growth of this industry is that none of these people produces anything that other people want to buy. They are only employed because equalities legislation requires companies and public sector agencies to monitor what they are doing... The people who are employed to do this monitoring and write these reports produce nothing of value themselves (the only people who are interested in the reports they produce are other employees of the equalities industry sitting in other offices), so the costs of employing them… all have to be passed on, either to customers… or to taxpayers. p. 71
Hitting new and small firms
While the Government's Impact Assessment assumes that the extra regulations will have no impact on economic growth, Williams warns that the new regulations could have a visible impact on job prospects. For example, they could also discourage self-employed individuals from making the leap to becoming an employer. Doing so now involves dealing with esoteric legal terminology that many potential employers do not understand and have previously not had to cope with to do their own jobs effectively:
No allowance is made for single-person, owner-managed firms, estimated at 3.5 million in number… Terminology that comes naturally to equality professionals working daily in that sphere can be opaque to people running a business or attempting to provide a public service. p. 3
... the annual consequences of this legislation will serve not to pay back the costs, but to add to them. The ideological benefits of the Equalities Act are debatable at best. The financial benefits simply do not exist. p. 5
For more information contact:
Nigel Williams, statistician, on 020 7799 6677
Civitas on 020 7799 6677
Notes for Editors
i. Nigel Williams is a statistician at Civitas.
ii. Assessing the Damage: Assessing the Equality Act Impact Assessment can be downloaded here.
iii. The Rise of the Equalities Industry, by sociologist Peter Saunders, is available from the Civitas shop and on Amazon Kindle, and can be ordered by calling 020 7799 6677.
iv. Civitas is an independent social policy think tank. It has no links to any political party and its research programme receives no state funding.