Ethnic diversity in the workplace: a guide for Australian graduates

What is ethnic diversity and why does it matter? Find out how Australia stacks up when it comes to ethnic diversity in the workplace.
Jaymes Carr
Jaymes Carr
Team GradAustralia
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Australia’s ethnic diversity in a global context

Here’s a trivia question with an interesting answer: what’s the most ethnically and culturally diverse country in the world?

It’s a trickier question than you might expect: for example, what qualifies as an ‘ethnic group’ in the first place? Are the different Berber tribes that inhabit the Sahara to be considered one ethnic group, or several? What about ‘German Australians’ or ‘Asian Americans’? And at what level should one recognise an Indigenous Australian ethnic group—the tribe (for example, the Wardandi), the group (Noongar), or the geographical region (SW Western Australia)?

Fortunately, there’s a way to sidestep such issues: you take a random sample of people from a country, ask them to list the major and minor ethnic groups in that country, ask them to identify the groups with which they identify, and then ask them to identify the groups with which they think most other people would identify. While still imperfect (a census would be preferable), this method (known as Fearon analysis) can, at least, lead to some measure of consensus based on how actual members of different ethnic groups respond. And the results are striking.

Still wondering about the most ethnically and culturally diverse country in the world? Using Fearon analysis, it’s Papua New Guinea, which contains hundreds of ethnic groups that collectively around 852 languages. After PNG, all but two of the next twenty-nine countries on the list belong to the African continent. As for Australia? It comes in at 140.

From all the lands on earth we come

Of course, this doesn’t mean that Australia isn’t a richly diverse and multicultural society on its terms (instead of, say, Gabon’s). In the 2016 census, more than 75% of Australians identified with an ancestry other than Australian, about 45% reported having at least one parent who has born overseas, and around 26% of the population were born in another country (with 19% of those Australians born in non-English speaking countries). All told, Australians speak some 200 languages, the most common of which, after English, are Chinese (Mandarin and Cantonese), Arabic, Vietnamese, and Italian.

This raises an important question about the experience of working in Australia: if, say, the gender split of Australia (it’s roughly 50/50) isn’t reflected in the Australian workforce (see Gender equality: what it means for today’s graduates), what about its ethnic diversity? The rest of this article will explore the issue of ethnic diversity in Australian workplaces: where its at, where it should be, and what’s being done to bridge the gap.

What do we mean by ethnic diversity?

For the sake of this article, we’ll employ the definition of cultural diversity offered by the Diversity Council Australia, which describes it as 'the variation between people in terms of how they identify on a range of dimensions including ancestry, ethnicity, ethno-religiosity, language, national origin, race, and/or religion.' This is distinct from ‘inclusion’, which ‘occurs when a diversity of people (e.g. of different ages, cultural backgrounds, genders) feel valued and respected, have access to opportunities and resources, and can contribute their perspectives and talents to improve their organisation’.

Why is workplace ethnic diversity important?

It’s good for individuals

Diversity makes people happier: this is true not only of people who belong to minority ethnic groups, but also of people for whom inclusion traditionally hasn’t been as hard to achieve. For example, the Diversity Council of Australia reported in 2017 that people in inclusive teams (this includes ethnically diverse teams) are 19 times more likely to be very satisfied with their work than people in non-inclusive teams. They’re also twice as likely to get a pay rise and regular career development opportunities.

It’s good for businesses

Ethnic and cultural diversity is also beneficial for businesses. According to a 2017 McKinsey report, companies in the top quartile for ethnic and cultural diversity on their executive teams were 33% more likely to have industry-leading profitability. Companies in the bottom quartile for ethnic and cultural diversity are 29% less likely to achieve above-average profitability.

It’s good for society

Data from the United States shows how reduced racial discrimination in the workplace can lead to significant economic (not to mention social) benefits for society at large. Economists from Stanford University and the University of Chicago analysed labour productivity in the United States from 1960 to 2008 and found that 20% of productivity growth over that time could be attributed directly to a reduction in racial discrimination. In Australia, migrants make an enormous contribution to Australia’s economy, collectively providing an estimated fiscal benefit of over 10 billion dollars in their first ten years of settlement.

How does Australia stack up when it comes to workplace ethnic diversity?

The good

A significant majority of Australians support diversity...

It’s encouraging to note, first of all, that Australians overwhelmingly support ethnic diversity in the workplace. In fact, three out of four Australian workers support or strongly support their organisation taking action to create a workplace which is diverse and inclusive, while only three percent strongly oppose it.

And so do many Australian businesses

Given the strong support for increased workplace ethnic diversity, it’s no surprise that many of Australia’s largest organisations have implemented policies aimed at increasing the diversity of their staff. By 2016, these organisations included PwC, Telstra, the Commonwealth Bank of Australia, most public service departments, and several major law firms.

The not so good

Ethnic diversity initiatives haven’t yet made a difference at the top

In 2016, McKinsey published its first report (Leading for Change) on the need to improve the representation of minority ethnic groups in the highest levels of Australian businesses. It noted a stark contrast between the ethnic diversity of Australian society, and the ethnic diversity of Australian leadership.

For example, while 32 percent of Australians have a non-Anglo-Celtic background, they only accounted (in 2016) for five percent of ASX 200 CEOs, four percent of federal parliamentarians, and fewer than two percent of senior positions in federal and state public service departments. They occupied zero university vice-chancellor positions and zero federal ministerial positions. Meanwhile, those with an Anglo-Celtic background filled between 76 and 86 percent of roles in the same categories.

The good news in the 2016 report was that many businesses and public service bodies (those mentioned included Westpac, PwC, Facebook, and the University of Sydney) were then in the process of implementing policies and programs designed to boost the representation of ethnically diverse individuals in senior leadership positions. So the big question now is: did those initiatives make a difference? Short answer: no.

In 2018, McKinsey published an update of the Leading for Change report, revealing that, in the two years since the edition, the representation of cultural diversity in the senior leadership of Australian organisations and institutions had decreased. For example, while those with an Anglo-Celtic background comprise 58 percent of the Australian population, they now fill 97 percent of executive leadership positions.

Similar trends were found across the other leadership categories, with those of Anglo-Celtic or European ancestry vastly over-represented (relative to the overall population of Australia), and members of all other ethnic groups consistently under-represented.  The report’s authors were clear about the implications of this data:

'This is a dismal statistic for a society that prides itself on its multiculturalism. It challenges Australia’s egalitarian self-image. It also challenges Australia as a nation whose prosperity relies upon international trade, capital inflows and mobility of people. It would be complacent to believe that it will only be a matter of time before cultural diversity is better represented.'

There is a clear correlation between ethnicity and average pay

As of 2018, there are several major organisations, including BHP, Deloitte, KPMG, and PwC, that publish annual pay gap reports designed to share information about which initiatives for promoting diversity work (and which don’t).

So far, despite some improvements over time, the data has been discouraging. For example, while most are familiar with the concept of a gender-based pay gap, there is also evidence of an ethnicity pay gap. In 2017, Deloitte reported that the median hourly pay gap for its black, asian and minority ethnic (BAME) employees is 8.7% (i.e. BAME employees earn 8.7% less) and its mean ethnicity pay gap is 12.9%. The firm’s median bonus gap for BAME employees is 34.7% and its mean ethnicity bonus gap is 41.9%.

Similarly, PwC reports a BAME pay gap of 12.8% and a BAME bonus gap is 35.4%. Interestingly (and unfortunately), PwC also notes that the ethnicity pay gap is not a consequence of pay inequality. Rather, it’s entirely driven by the fact that there are more non-BAME staff in senior higher-paid roles and more BAME staff in junior administrative roles. At EY, the median hourly ethnicity pay gap is 9.8%, and the median bonus gap is 35.7%.

Finally, at KPMG, the median ethnicity pay gap is 11.7% and the median bonus gap is 23.1%. Worse still, BAME employees are 10.8% less likely to receive a bonus in the first place. (At EY, they are 15.1% less likely to receive a bonus.)

The bad

People from minority ethnic groups still face higher rates of workplace discrimination

According to the Diversity Council of Australia, there is an inverse relationship between workplace inclusivity and workplace harassment. Specifically, those in inclusive workplaces are almost 7 times less likely than workers in non-inclusive teams to have personally experienced harassment and/or discrimination within the past twelve months. The statistics are particularly dire for Aboriginal and Torres Strait Islander Australians, 38% of whom have experienced workplace harassment and/or discrimination within the past twelve months.  

Members of ethnic minority groups must jump unfair hurdles just to enter the workplace

In 2013, researchers at the Australian National University performed a study to investigate whether or not job applicants in urban areas were more (or less) likely to receive an interview as a result of their presumed ethnicity. The researchers submitted 4,000 fictional applications for entry-level positions across various industries. In each application, they emphasised that the candidate had attended high school in Australia.

However, while the credentials of these hypothetical applicants were more or less identical, their names were selected at random from five broad ethnic groups: Anglo-Saxon, Indigenous, Italian, Chinese and Middle Eastern. As it turns out, this factor made an enormous difference. According to the researchers, 'To get as many interviews as an Anglo applicant with an Anglo-sounding name, an Indigenous person must submit 35 per cent more applications, a Chinese person must submit 68 per cent more applications, an Italian person must submit 12 per cent more applications, and a Middle Eastern person 64 per cent more applications.' The pattern is so stark that many immigration lawyers advise new migrants to consider anglicising their names and mention their language skills only if they’re relevant.

Another approach some employers take is to anonymise job applications, follow this link to find out more about what employers can do to promote ethnic diversity.