7 ETHNIC PARITY IN INCOME SUPPORT

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1 7 ETHNIC PARITY IN INCOME SUPPORT Summary of findings For customers who, in 2003, had a Work Focused Interview as part of an IS claim: There is evidence, for Ethnic Minorities overall, of a significant ethnic premium in employment and sustained outcomes. In terms of benefit receipt, there is a significant ethnic penalty in the first months immediately after the date of WFI, followed by a significant ethnic premium from month five onwards. These results appear to be driven by those for women (who make up 60 per cent of the sample). For men, there is evidence of ethnic parity in benefit receipt. Estimates for individuals living in the 272 disadvantaged group wards largely mirror the overall results. Matching re-weights the White sample from a state in which there are significant raw premiums in each outcome for Ethnic Minorities living in these wards (unlike for Ethnic Minorities in Great Britain as a whole, for whom there are significant raw penalties). At a district level, there is insufficient evidence to reject ethnic parity for employment outcomes. This causes some concern that the overall estimates may (at least partially) be the result of matching similar individuals across districts (although, of course, it may simply be that smaller sample sizes are affecting precision). For benefit outcomes, the results are fairly evenly split between not being able to reject ethnic parity, penalties and premiums. Black IS claimants exhibit significant raw premiums in employment and sustained employment outcomes. This means that, unlike Ethnic Minorities overall, they are more likely than Whites to be in (sustained) employment prior to matching. For almost all Black subgroups, however, once the White sample has been reweighted, a finding of ethnic parity in most outcomes (including benefit receipt) cannot be rejected. For most subgroups of Asian IS claimants, ethnic parity in (sustained) employment outcomes cannot be rejected. In terms of benefit receipt, however, there is much greater variety, with insufficient evidence to reject parity, significant premiums and significant penalties across different (amalgamated) areas. For individuals from Other Ethnic Minority subgroups, raw penalties tend to become smaller and insignificant for most outcomes in most regions, leaving insufficient evidence to reject ethnic parity. Individuals of Unknown ethnic origin appear to possess characteristics that make them more likely to be working (and less likely to be claiming benefits) than Ethnic Minorities: even after matching, there remain large and significant premiums in many outcomes, including at district level.

2 7.1 Introduction Income Support (IS) is a benefit for individuals aged 16 and over who are on low income. It cannot be claimed by those who are unemployed and actively seeking work (they should claim Jobseeker s Allowance instead), nor is it payable to individuals in full-time work (claimants must be working less than 16 hours per week, and their partner, if they have one, must be working less than 24 hours per week). In general, this means that claimants are either lone parents, or they are sick or disabled. 1 The amount of benefit payable is the individual s applicable amount minus any income they receive. The applicable amount consists of a personal allowance (dependent on age 2 and family circumstances 3 ), any relevant premiums (for disabled individuals or those with disabled children, for carers, and for bereaved individuals), and housing costs. 4 This means that the amount of IS received provides some information about family circumstances, and some information about personal wealth, both of which may affect an individual s labour market decisions. It is therefore important to control for the amount of IS received (at the start of the claim). This project considers individuals who have had a Work Focused Interview (WFI) as part of an IS claim in 2003 (where that interview takes place within 6 months of claim start date). 5 This is because ethnicity is better recorded for IS claimants who have had a WFI; however, this selection criteria raises two important issues: firstly, WFIs were in the process of being rolled out (via the introduction of Jobcentre Plus offices 6 ) in 2003, hence not all current offices will be represented in this sample. 7 Secondly, individuals who are employed (for less than 16 hours per week and still claiming IS) do not have to have a WFI 8, so such individuals will not appear in the sample. 9 This chapter now proceeds as follows: Section 7.2 provides a description of the IS sample, and discusses the raw labour market outcomes of Ethnic Minorities and Whites. Section 7.3 outlines ethnic parity estimates for Ethnic Minorities overall, while Section 7.4 considers results for Black, Asian and Other individuals (and various subgroups), and Section 7.5 details results for individuals of Unknown ethnic origin. Section 7.6 discusses the policy implications of these findings per cent of the IS sample analysed in this chapter are also part of the IB sample (discussed in Chapter 6), i.e. they had a Work Focused Interview in 2003 that occurred within six months of starting a an IS claim and an IB claim. 2 Claimants aged have a lower personal allowance than those aged 25 and over. 3 The personal allowance for a couple is higher than that for a single person. There is also an increase for each dependent child (under the age of 19). 4 Housing costs covered by IS are primarily mortgage repayments, as housing benefit can be claimed by individuals on low income who pay rent. 5 For more details, see Chapter 3. 6 It was expected that 275 offices would be rolled out by June 2003 (source: Welfare Benefits and Tax Credits Handbook, Child Poverty Action Group, London, 2003). 7 It should be noted that all districts appear in the sample, although the number of individuals in each district may not be representative of the number of IS claimants that would appear in these districts, had the rollout of Jobcentre Plus offices been completed. 8 Source: Welfare Benefits and Tax Credits Handbook, Child Poverty Action Group, London, It is also worth noting that individuals are only included in the sample if they are aged 57 or younger on the date of their WFI, thus avoiding any issues associated with the move from Minimum Income Guarantee (as part of IS) to Pension Credit (PC) for individuals aged 60 or above in April 2003.

3 7.2 Description of the IS Sample From Table 7.1, it can be seen that just under 94,000 individuals had a Work Focused Interview (WFI) as part of an Income Support (IS) claim in 2003, of whom 58 per cent were female. Approximately 83 per cent of the sample are from a White ethnic background, 9 per cent are from an Ethnic Minority background, and 8 per cent are from an Unknown ethnic background. Of the Ethnic Minority sample, 39 per cent are of Black ethnic origin (of which 45 per cent are Black Caribbean and 42 per cent are Black African), the same proportion (39 per cent) are of Asian ethnic origin (of which 57 per cent are Pakistani), and 21 per cent are of some other ethnic origin. Table 7.1 Ethnic Breakdown of IS sample Ethnic Sub-group All Males Females % Number % Number % Number White Ethnic Minority Black Black Caribbean Black African Other Black Asian Indian Pakistani Bangladeshi Other Asian Other Mixed Chinese Other Ethnic Group Unknown All Figure 7.1 illustrates the observed raw employment and benefit outcomes for all Ethnic Minorities 10 and Whites in the IS sample over an 18 month period, starting 6 months before WFI date. Differences in outcomes between the two groups represent raw estimates of ethnic parity. A person is classified as being employed or on benefit in a particular month if they were employed or on benefit for at least 15 of the previous 30 days. This means that although all customers were on benefit on the day they had their first WFI as part of an IS claim (by definition), not all were on benefit for at least 15 of the 30 days leading up to that interview, hence on the day of entry (the vertical line in Figure 7.1), the proportion of the sample on benefit is less than one. 11 An individual is classified as being in sustained employment if they have been continuously employed for the past three months (90 days). 10 The Ethnic Minority groups considered are those reported in Table 7.1: Black Caribbean, Black African, Other Black, Indian, Pakistani, Bangladeshi, Other Asian, Mixed, Chinese, and Other. Those of Unknown ethnic origin are excluded from the analysis of Ethnic Minorities and are instead discussed separately in Section This may be reasonable if a large proportion of individuals have their first Work Focused Interview less than 15 days after making a claim for Income Support.

4 Figure 7.1 Labour market status over time for unmatched sample 0.40 Employment 0.40 Sustained employment On benefit Client group: IS; Gender: Any; District: All EthnicMinorities Whites Notes: 1. the x-axis shows the 6 months before entry into the programme (x=-5 to 0) and the 12 months after (x=1 to 12). 2. the y-axis shows the proportion of the sample employed or on benefit. Figure 7.1 shows that there are differences in the raw employment, sustained employment and benefit outcomes of the two groups, both before and after WFI date: these gaps are almost always significant. 12 The proportion of individuals in employment increases over time, from approximately 17 per cent (of both Whites and Ethnic Minorities) in the first month after WFI date 13, to 24 per cent of Ethnic Minorities (and 27 per cent of Whites) twelve months later. Three months after inflow, 14 per cent of individuals (both Ethnic Minorities and Whites) are in sustained employment, equivalent to approximately 75 per cent of Ethnic Minorities (and 71 per cent of Whites) in employment at that time. Twelve months after WFI date, 86 per cent of the Ethnic Minorities (and 83 per cent of the Whites) who are in work are sustainably employed. In the first month after WFI date, 99.9 per cent of individuals (both Ethnic Minorities and Whites) are still on benefit. 14 Over time, the proportion of individuals on benefit decreases at roughly the same rate for Whites and Ethnic Minorities, such that after 12 See Table A7.1.4 in Appendix A7A.1 for more details. 13 To be eligible for IS, individuals should not be working more than 16 hours per week. The fact that some employers report that an individual is working for them (even where that individual is not liable for income tax) may explain at least part of the non-zero employment figure observed at the point at which individuals have their first WFI as part of an IS claim. Because the figure refers not to the day of interview itself, but to employment in the last 30 days, it is also possible that nobody was working on the actual day of interview, but had been for at least 15 of the previous 30 days. There may also be some fraudulent IS claims. Unfortunately, it is not possible to quantify the impact of any of these suggestions. 14 All individuals were on benefit, by definition, on the day they had their first WFI as part of an IS claim.

5 twelve months, approximately 76 per cent of Ethnic Minorities and 74 per cent of Whites are still on benefit. The raw results therefore suggest that there is an ethnic penalty in all three outcomes, i.e. that Ethnic Minorities claiming Income Support are less likely to be employed, less likely to be sustainably employed and more likely to be on benefits, than White individuals. However, it is clear that Whites and Ethnic Minorities in the IS sample are very different in terms of a number of observed pre-programme characteristics, and that these differences are likely to affect these estimates of ethnic parity. 15 Table 7.2 makes comparisons between a number of broad ethnic groupings across a range of key background characteristics and outcome variables. Table 7.2 Characteristics of the IS sample by ethnicity All White Ethnic Minority Black Asian Other Unknown female *** 0.654*** ** age at inflow *** *** *** married/cohabiting *** 0.036*** 0.282*** 0.119*** 0.131*** disabled * 0.194*** 0.290*** 0.299*** 0.316*** number of kids at inflow *** 0.934*** 1.276*** * age of youngest child at inflow ** 5.119** % time employed, years *** 0.399** 0.255*** 0.317*** 0.413*** before inflow % time on benefits, years *** 0.577*** 0.555*** 0.592*** 0.470*** before inflow basic skills need *** 0.147*** 0.194*** 0.160*** 0.068*** participated in a voluntary *** 0.072*** *** programme prior to inflow ttwa unemployment rate *** 0.057*** 0.054* 0.055*** 0.052*** % time employed, months *** 0.273*** 0.156*** 0.202*** 0.247*** 1-12 after inflow % time on benefits, months 1-12 after inflow *** 0.887*** 0.837*** 0.886*** 0.835*** Notes: 1. *** indicates that mean is significantly different from corresponding mean for White sample at 1% level of significance, ** indicates that mean is significantly different from corresponding mean for White sample at 5% level of significance, and * indicates that mean is significantly different from corresponding mean for White sample at 10% level of significance. 2. % time on benefits/employment is between 0 and 1. Ethnic Minorities as a whole are more likely (than Whites) to be female, older, married/cohabiting, disabled, have more children, have a basic skills need, and live in a higher unemployment area; on average, they have also spent a larger proportion of time on benefit (and a smaller proportion of time in employment) both before and after Work Focused Interview. The Asian subgroup (which makes up 39 per cent of the Ethnic Minority sample) differs from Whites in the same ways that Ethnic Minorities do, with the exception that they are likely to have spent a smaller proportion of time on benefits in the twelve months after inflow, and are less likely to have participated in a voluntary programme prior to inflow. The group of Other Ethnic Minorities also differs from Whites in broadly the same way that Ethnic Minorities overall do, except that they are 15 See Table A7.1.1 in Appendix A7A.1 for more details on the ways in which Ethnic Minorities differ from Whites.

6 approximately the same age and have the same number of children, but are less likely to be female, and they have a youngest child who is, on average, younger than the youngest child of White individuals at the start of the IS claim. The Black subgroup is more likely (than Whites) to be female, to have more children, to have participated in a voluntary programme prior to inflow, and to live in a higher unemployment area; they are less likely to be married or disabled. They also appear to have spent a larger proportion of time on benefits and in employment both before and after their Work Focused Interview. Like Ethnic Minorities as a whole, individuals of Unknown ethnic origin are, on average, older than Whites, more likely to be married/cohabiting, more likely to be disabled and tend to have more children. Unlike Ethnic Minorities, however, they have spent a larger proportion of the three years prior to inflow in employment and a smaller proportion of time on benefits than White individuals in the IS sample. They are much less likely to have a basic skills need and are also, interestingly, much less likely to have participated in a voluntary programme prior to inflow. In terms of outcomes, they have spent a greater proportion of the twelve months after date of WFI in employment and a smaller proportion of time on benefits. What is clear from Table 7.2 is that the composition of the White IS sample is significantly different from that of the Ethnic Minority sample, and that if this difference in composition is not taken into account, estimates of ethnic parity may be biased. Moreover, even within the Ethnic Minority sample, there is significant variation in both background characteristics and labour market outcomes. This highlights the importance of considering ethnic parity measures at both the broad and more disaggregated levels. Section 7.3 considers ethnic parity measures for the Ethnic Minority sample as a whole, while Section 7.4 considers these measures for the more disaggregated ethnic groupings. In all cases, samples are further broken down by gender and geography (where possible). 7.3 Estimates of for All Ethnic Minority Groups Introduction Table 7.3 provides a summary of results for the Ethnic Minority sample as a whole, split, where possible, by gender and region. 16 It also shows the success (or otherwise) of attempts to rebalance the White group to look like each of the 28 Ethnic Minority subgroups along four dimensions. 17 In most cases, matching was very successful in ensuring the construction of an otherwise similar White customer group. In several cases, however, it was not. For men in Manchester, matching actually worsened the overall median bias of the characteristics of the White sample compared to the Ethnic Minority sample of interest (indicated by MB). For individuals in Lambeth, Southwark & Wandsworth, matching was unable to balance all of the outcomes of interest prior to inflow: both employment and sustained employment histories remain significantly different after matching (indicated by UH(E,S)). For individuals in Great Britain as a whole, more than 35 pre-programme characteristics remain unbalanced, on average, after 16 Analysis is only carried out on Ethnic Minority groups that contain more than 400 individuals, and where less than 95 per cent of the sample is lost to common support (28 in total for the Ethnic Minority sample as a whole). 17 See notes to Table 7.3 for more details.

7 matching (indicated by UC(35)). For women in Lambeth, Southwark & Wandsworth, more than 30 (33 in total) per cent of the Ethnic Minority sample had to be dropped from the analysis, because no appropriate White comparison group could be found, i.e. these individuals fell outside the common support. 18 In Table , completely reliable results (for which there are neither UC, UH, MB, nor CS problems) are dark-shaded. Groups for which there are only common support (but no other matching) problems are light-shaded (indicating reliable results, but for a significantly reduced subset of the ethnic minority population of interest). The table also shows the Appendix subsection where detailed results can be found. Table 7.3 Summary of Subgroup Analysis for All Ethnic Minorities Regional Subgroup Sex N Matching Ethnic Parity Ethnic Penalty Ethnic Premium Appendix section All Any 8560 CS(0)UC(35) B E,S,B 1 M 3440 CS(0)UC(22) B E,S 2 F 5120 CS(0)UC(29) B E,S,B Wards Any 3800 CS(0)UC(5) B E,S 4 M 1500 CS(0)UC(0) S B E 5 F 2280 CS(0)UC(5) B E,S 6 Cities London Any 3960 CS(2)UC(12) S,B E 7 M 1460 CS(4)UC(5) E,S,B 8 F 2500 CS(3)UC(9) E,S B 9 Manchester Any 920 CS(1)UC(3) E,S,B 10 M 420 CS(3)UC(0)MB E,S B 11 F 500 CS(2)UC(0) E,S,B 12 Great Britain (excluding 6 cities) Any 3060 CS(2)UC(6) E,S B 13 M 1340 CS(5)UC(7) E,S B 14 F 1720 CS(2)UC(8) E,S B 15 Jobcentre Plus Districts Lancashire East Any 720 CS(29)UC(7) E,S B 16 Greater Manchester Central Any 880 CS(1)UC(2) E,S,B 17 M 400 CS(2)UC(0) E,S B 18 F 480 CS(2)UC(0) E,S,B 19 Calderdale & Kirklees Any 740 CS(3)UC(6) E,S,B 20 F 400 CS(4)UC(0) E,S B 21 Lambeth, Southwark & Wandsworth Any 1520 CS(22)UC(18)UH(E,S) E,S B 22 M 520 CS(22)UC(4)MB E,S,B 23 F 1000 CS(33)UC(7) E,S B 24 North East London Any 580 CS(7)UC(0) E,S,B 25 Brent, Harrow & Hillingdon Any 1360 CS(2)UC(4) S E,B 26 M 500 CS(2)UC(0) E,S,B 27 F 860 CS(5)UC(5) E,S,B 28 Notes to Table 7.3: 1. In Matching column: CS(xx) means that xx percent of the Ethnic Minority sample was lost to common support (where xx will always be 95 per cent or less); UC(xx) means that even after matching, xx covariates remain unbalanced at the 5 per cent significance level; MB means that matching worsened median bias compared to the unmatched sample; UH(E,S,B) means that after matching, variables in brackets (see note 2) were not balanced in at least one of the six months prior to entering the IS sample (at the 5 per cent significance level). 2. In columns 5, 6 and 7: E represents results for employment, S for sustained employment and B for benefit receipt. If any of the outcomes are recorded in the Ethnic Penalty or Ethnic Premium column, it means that there was a significant (at the 5 per cent level) difference between the outcomes of Ethnic Minorities and Whites in at least one of the 12 months after entering the sample. 3. Dark-shaded results are those considered completely reliable. This means that fewer than 35 covariates were unbalanced after matching (and the relevant labour market history variable had been successfully balanced), and that matching did not worsen the median bias. Light-shaded results are ones where the only problem is that more than 30 per cent of the sample has been lost to common support. This means that results are still 18 Further details of these matching problems can be found in Chapter 4 of this report. 19 The same also applies to Tables 7.4, 7.5, 7.6 and 7.7.

8 reliable, but for a significantly reduced proportion of the Ethnic Minority group of interest. If there is only an unbalanced history problem, one can speculate as to how results may be biased (i.e. whether they are upward or downward biased). 4. Great Britain (excluding six cities) refers to all areas in Great Britain, excluding Birmingham, Bradford, Leeds, Leicester, London and Manchester. 5. Appendix section refers to the relevant subsection of Appendix A7A and A7B in which full results and graphs can be found Overall Measure From Table 7.3, it is clear that when the Ethnic Minority group is considered as a whole, there is an ethnic premium in employment, sustained employment and benefit outcomes (there is also an ethnic penalty in benefit receipt in at least one of the twelve months after inflow). It should be noted, however, that 35 covariates remain unbalanced after matching, the upper limit on the number of characteristics that can remain unbalanced with the result still being considered reliable. Upon closer inspection 20, it is clear that the majority of these variables are district-level dummies, indicating that, on the whole, appropriate individuals are being compared, but that similar Ethnic Minorities and Whites live in different areas. This might be a problem if, for example, there is poorer service delivery (or a lower vacancy rate) in regions where Ethnic Minorities predominate, in which case the analysis would ascribe as an ethnic penalty something that is in fact due to the local area (Jobcentre Plus performance and/or labour market conditions) which affects ALL (including White) customers. District-level analysis (in which Ethnic Minorities are forcibly matched to Whites within the same Jobcentre Plus district) should help overcome this issue, and is discussed in more detail in Section The employment results for Ethnic Minorities in Great Britain are illustrated in Figure As indicated in Table 7.2 (and confirmed here), it is clear that Ethnic Minorities are significantly less likely to be employed than Whites, both before and after WFI date: in the twelfth month after inflow, for example, Ethnic Minorities are 2.8 percentage points (10.3 per cent) less likely to be working than Whites. Once the White sample is re-weighted in an appropriate way (with more weight being given to Whites who have spent less time in employment prior to inflow, amongst other things), however, this penalty disappears, and is replaced by a premium, significant at least at the 5 per cent level, in each of the twelve months after inflow. This premium ranges from 1.1 percentage points (7 per cent) in month 1 to 2.1 percentage points (9.3 per cent) in month These findings (and those for benefit receipt, discussed below) can be confirmed using simple regression techniques (either Ordinary Least Squares (OLS) or Fully Integrated Linear Matching (FILM) 23 ), thus implying that controlling for background characteristics in a linear manner is sufficient in this case See Table A7.1.3c in Appendix A7A.1 for more details. 21 See Table A7.1.4 in Appendix A7A.1 for more details. 22 It should be noted that the percentage point and per cent differences quoted in this section (and throughout the remainder of the chapter) do not necessarily correspond to the same months; they are simply designed to provide an indication of the spectrum of significant results. 23 See Chapter 4 for more details. 24 See Table A7.1.2 in Appendix A7A.1 for more details.

9 Figure 7.2 Estimate of ethnic parity in employment outcomes for IS claimants ***0***3***8*** *** 8*** 6** 0.021*** Absolute parities. Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Any; District: All Notes to Figure 7.2: 1. the x-axis shows the 6 months before entry into the programme (x=-5 to 0) and the 12 months after (x=1 to 12). 2. the y-axis shows the difference in the proportions in employment between Ethnic Minority and White claimants. Duration analysis has also been carried out on employment outcomes for this group, the results of which are shown in Figure 5.3. The raw differences indicate that Ethnic Minorities take, on average, 13 days longer to find a job following date of Work Focused Interview than White IS claimants: this difference is significant at the 1 per cent level. After re-weighting the White sample, Ethnic Minorities now take significantly fewer days to find a job than comparable Whites: Ethnic Minorities take, on average, 266 days to find a job, whilst White individuals take, on average, 271 days. This indicates that the penalty evident in the raw outcomes is largely the result of differences in observable characteristics between Ethnic Minorities and Whites. Figure 7.3 Duration analysis of employment outcomes for IS claimants Difference: 13.0*** (Whites: 253 days) Difference: -5.0** (Matched whites: 271 days) White EthnicMinorities White EthnicMinorities Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Any; District: All Notes to Figure 7.3: 1. the x-axis shows the number of days since entering the sample. 2. the y-axis shows the proportion of Ethnic Minority and White claimants yet to exit to employment. 3. *** indicates that the mean difference between the White and Minority subgroups is significantly different at the 1 per cent level of significance, ** indicates that it is different at the 5 per cent level of significance, and * indicates that it is different at the 10 per cent level of significance. The raw difference between Ethnic Minorities and Whites in terms of the proportion of individuals in sustained employment (shown in Figure 7.4) indicates that there is an ethnic penalty in this outcome as well, i.e. that Ethnic Minorities are significantly less

10 likely to have been working for three months continuously at any given point in time than Whites. Once the White sample is re-weighted, however, this penalty turns into a premium in each of the months after the WFI date for which results are available, ranging from 1.2 to 2.0 percentage points (7.8 to 11.6 per cent). Figure 7.4 Estimate of ethnic parity in sustained employment outcomes for IS claimants * -3***-7*** ** 5*** 7*** 8*** Absolute parities. Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Any; District: All Notes to Figure 7.4: 1. the x-axis shows the 6 months before entry into the programme (x=-5 to 0) and the 12 months after (x=1 to 12). 2. the y-axis shows the difference in the proportions in sustained employment between Ethnic Minority and White claimants. Figure 7.5 shows that the proportion of Ethnic Minority customers on benefit is greater than the proportion of White customers on benefit in all months both before and after WFI date: this difference is significant in all but the first month after inflow. After appropriately re-weighting the White group, there remains evidence of a significant ethnic penalty in benefit receipt in month 2 (but of only 0.5 percentage points, or 0.6 per cent), after which this penalty turns into a premium, becoming significant in month 5, and increasing in magnitude over the period (from 1.2 percentage points in month 5 to 2.2 percentage points in month 11, equivalent to Ethnic Minorities being between 1.3 and 2.8 per cent less likely to be claiming benefits than their matched White counterparts). Figure 7.5 Estimate of ethnic parity in benefit receipt for IS claimants *** 3*** 5*** 9*** ***-8***0*** Absolute parities. Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Any; District: All Notes to Figure 7.5: 1. the x-axis shows the 6 months before entry into the programme (x=-5 to 0) and the 12 months after (x=1 to 12).

11 2. the y-axis shows the difference in the proportions receiving benefits between Ethnic Minority and White claimants. Duration analysis has also been carried out on benefit exit rates for this group, the results of which are shown in Figure 7.6. As with the raw differences outlined in Figure 7.5, those displayed in Figure 7.6 provide evidence of a significant ethnic penalty in time taken to stop claiming benefits (for the first time following date of Work Focused Interview): Ethnic Minorities take, on average, seven days longer to leave benefits than White IS claimants. Once the White sample has been reweighted, however, evidence of an ethnic premium in benefit exit rates emerges: Ethnic Minorities now stop claiming benefits three days earlier, on average, than comparable White customers. Figure 7.6 Duration analysis of benefit receipt for IS claimants Difference: 7.0*** (Whites: 291 days) Difference: -3.0** (Matched whites: 301 days) White EthnicMinorities White EthnicMinorities Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Any; District: All Notes to Figure 7.6: 1. the x-axis shows the number of days since entering the sample. 2. the y-axis shows the proportion of Ethnic Minority and White claimants yet to leave benefits. 3. *** indicates that the mean difference between the White and Minority subgroups is significantly different at the 1 per cent level of significance, ** indicates that it is different at the 5 per cent level of significance, and * indicates that it is different at the 10 per cent level of significance. Taken together, these results indicate that Ethnic Minorities and Whites who had a Work Focused Interview as part of an Income Support claim in 2003 differ significantly in terms of observed characteristics. These differences mean that any reliance on raw results would lead to the incorrect conclusion that there were significant ethnic penalties in each of the outcomes under consideration. It must be remembered, however, that for this group, 35 covariates remained unbalanced after matching. To see whether these results can be relied upon, attention will now turn to ethnic parity estimates split according to gender By Gender When the analysis is carried out separately by gender, the overall pattern (described above) remains the same for women (who make up 60 per cent of the IS sample). While these results are regarded as reliable (with only 29 unbalanced covariates), a number of district-level dummies are still not being appropriately balanced, such that the matching of individuals across areas may again be an issue. For men, there remains an ethnic premium in employment and sustained employment outcomes, but the differences in benefit receipt observed for women and for Ethnic Minorities overall

12 disappear, leaving insufficient evidence to reject ethnic parity in benefit receipt for men. There results are confirmed using simple regression techniques: for men, both OLS and FILM yield similar results, but for the employment outcomes of women in particular, there is evidence of heterogeneous effects, as only FILM provides results that are sufficiently similar to the kernel matching techniques preferred here. 25 Figure 7.7 provides estimates of ethnic parity in employment outcomes for men and women. From the raw figures, Ethnic Minority men appear to be at a relative disadvantage to Ethnic Minority women (i.e. they face a greater ethnic penalty relative to their White comparison group) prior to WFI date, but seem to perform relatively better thereafter: in the sixth month before inflow, the penalty is approximately 6.5 percentage points for men and approximately 4 percentage points for women, while in the twelfth month after WFI date, the penalty is 2.2 percentage points for men, but 3.5 percentage points for women. Figure 7.7 Estimate of ethnic parity in employment outcomes for IS claimants, by gender Males ** -9***-9***2*** * 9** 0.020** 0.024** Absolute parities. Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Males; District: All Females ** 3***8***5*** ** 8** ** Absolute parities. Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Females; District: All See notes to Figure See Table A7.2.2 in Appendix A7A.2 (for men) and Table A7.3.2 in Appendix A7A.3 (for women).

13 Once the relevant White samples have been appropriately re-weighted, however, these penalties turn into ethnic premiums for both men and women. For men, this advantage increases from 1.3 percentage points (11.2 per cent) in month 1 26 to 2.4 percentage points (13.5 per cent) in month 12, while for women, it peaks at 2.1 percentage points (9.6 per cent) in month These differences are similar in magnitude to (although less significant than) those found for Ethnic Minorities overall. While the raw figures (shown in Figure 7.8) indicate that Ethnic Minority men are less likely than White men to be in sustained employment prior to WFI date, there is very little evidence of any disparity thereafter. It is therefore unsurprising that once the White sample is appropriately re-weighted, evidence emerges of an ethnic premium, significant at the 5 per cent level in months 7 to 9, and months 11 and 12, ranging from 1.6 to 2.1 percentage points (12.0 to 15.5 per cent). 28 Figure 7.8 Estimates of ethnic parity in sustained employment outcomes for IS claimants, by gender Males * 6** 0.021** Absolute parities. Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Males; District: All Females * -8***4*** ** 6** 8** 7* Absolute parities. Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Females; District: All See notes to Figure Although this is only significant at the 10 per cent level. 27 See Appendix A7A.2 (for men) and A7A.3 (for women) for further details. 28 See Appendix A7A.2 for further details.

14 For women, there remains evidence of an ethnic penalty in sustained employment outcomes in most months according to the raw results. 29 This penalty turns into a significant ethnic premium after the White sample has been re-weighted, however, with Ethnic Minority women being between 1.4 and 2.1 percentage points (7.2 and 11.0 per cent) more likely to have been employed for at least three consecutive months than similar White women. Figure 7.9 provides estimates of ethnic parity in benefit receipt for men and women. 30 As with the findings for Ethnic Minorities as a whole, there is evidence of ethnic penalty in the raw results for both sexes, which are of similar magnitude. Figure 7.9 Estimates of ethnic parity in benefit receipt for IS claimants, by gender Males *** 0.021*** 0.027*** 0.024*** Absolute parities. Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Males; District: All Females *** 0.009* ** ***8***8*** Absolute parities. Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Females; District: All See notes to Figure 7.5. For women, the re-weighting process produces broadly similar results to those for Ethnic Minorities overall, i.e. there is a small but significant ethnic penalty in the 29 See Appendix A7A.3 for further details. 30 See Appendix A7A.2 (for men) and A7A.3 (for women) for more details.

15 second month after inflow 31, which becomes a larger and more significant ethnic premium from month 5 onwards. For men, on the other hand, the raw differences disappear entirely, leaving insufficient evidence to reject ethnic parity in benefit receipt. This is in contrast to the results for Ethnic Minorities overall. It appears, therefore, that it is Ethnic Minority women who are driving the overall results (for benefit receipt at least) By Regional Sub-groupings Next, the sample is disaggregated not only by gender, but also by smaller regional groupings (based primarily on Jobcentre Plus districts, although the six cities with the largest Ethnic Minority populations are also considered) to ascertain whether these estimated effects vary by geography. Detailed results for all subgroups can be found in Appendices A7A.4-A7A.28 and A7B.4-A7B.28. One reason for estimating separate regional effects (as outlined in Section above) is that significantly unbalanced area-based variables in the overall sample indicate that Ethnic Minority individuals in one region are being matched with comparable White individuals in others. 32 So if, for example, there is poorer service delivery (or a lower vacancy rate) in regions where Ethnic Minorities predominate, the analysis would ascribe as an ethnic penalty something that is in fact due to the local area (Jobcentre Plus performance and/or labour market conditions) which affects ALL (including White) customers. Matching individuals within regions should help overcome these difficulties. From Table 7.3, it can be seen that the overall results are not fully replicated in any of the smaller regional groupings. In general, there tends to be less evidence to support rejection of ethnic parity and fewer significant differences between Ethnic Minorities and Whites across all three outcomes, raising some concern that the significant results found for Great Britain as a whole may, at least partly, be driven by matching individuals across districts (although, of course, it may simply be due to smaller sample sizes). Figure 7.10 provides estimates of ethnic parity in employment outcomes for individuals living in Great Britain (excluding the six cities with the highest Ethnic Minority populations), who make up 36 per cent of the overall sample. 33 If raw estimates were relied upon, one would conclude that Ethnic Minorities are significantly less likely than Whites to be in work, both before and after having a WFI as part of an IS claim. 34 Once the White sample has been appropriately re-weighted, however, these penalties disappear, leaving no evidence of any significant difference between the employment probabilities of the two groups. This is similarly true for most of the regions for which results are available, including Manchester, Lancashire 31 There is also a penalty evident in the first month after inflow, although this is only significant at the 10 per cent level. 32 Even if all area-based variables were balanced, on average, it might still be the case that Ethnic Minorities from one district were being matched to White individuals in others. 33 See Appendix A7A.13 for more details. 34 The raw penalties are larger than for Ethnic Minorities in Great Britain as a whole: in the six months prior to inflow, Ethnic Minorities are approximately 8 percentage points less likely to be employed than Whites in Great Britain (excluding the six cities with the highest Ethnic Minority populations), compared with approximately 5 percentage points for Ethnic Minorities overall. In the twelve months after inflow, the premium ranges from 2.9 to 3.9 percentage points (11.4 to 18.0 per cent) compared with 1.1 to 2.1 percentage points (7.0 to 11.0 per cent) for Ethnic Minorities in Great Britain as a whole.

16 East and Calderdale & Kirklees 35, and is in contrast to the results for Ethnic Minorities in Great Britain as a whole, for whom an ethnic premium is evident. Interestingly, if one were to rely on simple regression techniques (either OLS or FILM) to estimate ethnic parity for this group, the conclusion would be that there was a significant ethnic premium in employment outcomes in (at least) months six and nine after WFI date. 36 This is in contrast to the raw results, which indicate that there is a significant ethnic penalty in every month. This implies that Ethnic Minorities have background characteristics that make them much less likely to be in work than Whites; for example, they are less likely to have educational qualifications (of any level), and they are more likely to have four or more children to care for at the point at which they have a WFI 37, such that once these characteristics are taken into account, Ethnic Minorities appear to be performing relatively better than similar Whites. The preferred matching estimates indicate that there is insufficient evidence to reject ethnic parity in employment outcomes, however, so the distribution of characteristics displayed by Ethnic Minorities and Whites must be sufficiently different that controlling for them in a linear manner does not ensure that appropriate individuals are compared (and, indeed, 2.4 per cent of the sample is lost to common support). 38 Figure 7.10 Estimates of ethnic parity in employment outcomes for IS claimants living in Great Britain (excluding the six cities with the highest Ethnic Minority populations) ***4***0***9*** Absolute parities. Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Any; District: RestofGB See notes to Figure 7.2. For individuals living in the 272 disadvantaged group wards 39, there is evidence of an ethnic premium in employment outcomes (and in sustained employment outcomes and benefit receipt) after matching, just as there is for Ethnic Minorities in Great Britain as a whole. Unlike for Ethnic Minorities overall, however, the raw results for individuals living in these wards also show a significant ethnic premium in every month. 40 This is an interesting finding and implies that not only are the characteristics 35 Refer to Table 7.3 for the Appendix subsection in which results for these subgroups can be found. 36 See Table A in Appendix A7A.13 for more details. 37 See Table A in Appendix A7A.13 for more details. 38 Interestingly, the regression results are very similar to the raw results in terms of benefit outcomes (they both indicate a significant ethnic penalty), while matching again signifies that there is insufficient evidence to reject ethnic parity. 39 See Appendices A7A.4 and A7B.4 for more details. 40 Raw premiums are also evident for Ethnic Minority women (and Ethnic Minorities overall, but not Ethnic Minority men) living in London (which contains 180 of the 272 disadvantaged group wards), although the premium in benefit receipt is only evident in the months after inflow (there is an ethnic

17 (and consequent labour market performance) of Ethnic Minorities and Whites living in the 272 disadvantaged group wards significantly different from one another, but so too are the characteristics of either Ethnic Minorities, or Whites, or both, from those living in other parts of Great Britain. As the end result is the same, however, the relevant White group must have been reweighted in a completely different way for each of these populations of interest: for Ethnic Minorities overall, more weight will have been given to White individuals who were less likely to have been employed (at least in the six months prior to inflow), amongst other things, while for Ethnic Minorities living in the 272 disadvantaged group wards, more weight will have been given to White individuals who were more likely to have been employed over the same period. Figure 7.11 provides estimates of ethnic parity in sustained employment outcomes for individuals living in Great Britain (excluding the six cities with the highest Ethnic Minority populations). 41 While the raw estimates would lead one to conclude that there is a significant ethnic penalty in sustained employment outcomes (that is larger, on average, than for Ethnic Minorities in Great Britain as a whole, both before and after WFI date), once the White sample has been appropriately re-weighted, this ethnic penalty disappears, leaving insufficient evidence to reject a finding of ethnic parity in sustained employment outcomes in every month for which results are available. This is in contrast to the results for Ethnic Minorities in Great Britain including the six cities with the highest Ethnic Minority populations, where there was a significant ethnic premium in every month. Figure 7.11 Estimates of ethnic parity in sustained employment outcomes for IS claimants living in Great Britain (excluding the six cities with the highest Ethnic Minority populations) ***7***7***7*** Absolute parities. Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Any; District: RestofGB See notes to Figure 7.4. One cannot reject a finding of ethnic parity in sustained employment outcomes in any of the regions for which results are available, with the exception of Ethnic Minority women living in the 272 disadvantaged group wards (and overall in the same areas), penalty in the six months leading up to WFI date). This seems to indicate that Ethnic Minority women (the overall results are clearly driven by the results for women) benefit more from having a WFI than do White women (at least in terms of the proportion claiming benefit up to a year after inflow). 41 See Appendix A7A.13 for more details.

18 and for women living in Brent, Harrow & Hillingdon. 42 In each case, results mirror those for Ethnic Minorities in Great Britain as a whole, i.e. an ethnic premium is found after matching. The raw difference in the rate of benefit receipt between Ethnic Minorities and Whites living in the 272 wards with the highest unemployment rates (shown in Figure 7.12) indicates that there is an ethnic premium in almost every month (with the exception of the first two months after WFI date). 43 This is in contrast to the results for Ethnic Minorities overall, where there was evidence of an ethnic penalty in all months. Once the White comparison group has been appropriately re-weighted, however, this premium disappears, indicating that the same proportion of Ethnic Minorities and Whites remain on benefit up to 12 months after WFI date. 44 For Ethnic Minorities in Great Britain as a whole, on the other hand, the raw penalty evident in the months after WFI date turns into a premium from month 5 onwards (the penalty remains significant in the second month after inflow), once matching has occurred. Figure 7.12 Estimates of ethnic parity in benefit receipt for IS claimants living in the 272 disadvantaged group wards ** 4***3***2*** Absolute parities. Ethnic minority group: EthnicMinorities; Client group: IS; Gender: Any; District: Ward272 See notes to Figure 7.5. Insufficient evidence to reject ethnic parity in benefit receipt is also found in almost all other regions. 45 For women (and both men and women analysed together), this indicates a divergence from the overall results (as described above), but for men, a finding of ethnic parity in benefit receipt cannot be rejected at national level either. With this in mind, the finding of a significant ethnic premium for male IS claimants 42 See Table 7.3 for the Appendix subsections in which detailed results for these groups can be found. 43 See Appendix A7A.4 for more details. 44 Figure 7.10 shows some evidence of an ethnic premium in the months after matching, although this difference is never significant. Simple regression techniques (both OLS and FILM) provide estimates that are broadly similar to the raw results (i.e. they continue to show that Ethnic Minorities are significantly less likely than Whites to be claiming benefits in the months after inflow), indicating the importance of the re-weighting process in matching. 45 The exceptions are for female IS claimants living in London, including Brent, Harrow & Hillingdon (the premium is also evident for all IS claimants in this district), for whom there is a premium (significant from month 6 onwards), and for women (and the group as a whole) living in Great Britain (excluding the six cities with the highest Ethnic Minority populations), all Ethnic Minorities living in Lancashire East, and women living in Calderdale & Kirklees, where there is a penalty (significant in the first few months after inflow). These patterns mirror those found for the relevant groups living in Great Britain as a whole.

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