All Hands In? Making Diversity Work for All

Executive summary

This report considers five key groups who are widely considered disadvantaged in the labour market and who often face discrimination based on their group membership: immigrants, their descendants and ethnic minorities; LGBT people; older people; people with disabilities; and women.

OECD labour markets and societies have become increasingly diverse over the past decades. For example, shares of immigrants and their children have increased in virtually all OECD countries; more people are open about their sexual orientation than ever before; and the share of women in the labour force has increased often markedly. Awareness for issues surrounding diversity has also increased: in 2018, an overwhelming majority out of the 2 400 Human Resource (HR) professionals surveyed by the OECD in collaboration with national HR associations agreed that in the previous five years, the topic of diversity had gained more attention in their country (85%) and in their companies specifically (65%).

Ensuring that OECD countries are equipped to make the most of diversity by fully utilising all talent among diverse populations and promoting inclusive labour markets and societies is a key challenge ahead. Both businesses and governments are responding to this challenge with policies to strengthen the inclusion of diverse populations at the workplace and in the labour market in general. This report assesses: i) how labour market inclusion of women and minority groups in OECD countries has evolved over time; ii) the evidence on how diversity affects economic outcomes; and iii) which policies countries have implemented and what is known about their effectiveness.

While there has been some progress, there is a long way to go to achieve full inclusion

Recent trends suggest some margin of optimism regarding the attitudes towards women and minority groups. Attitudes towards gender equality and LGBT people, for example, have become more favourable in OECD countries over the past ten years. In addition, labour market outcomes have improved on many fronts. Employment gaps between men and women and between older and prime-age workers have decreased considerably. In two out of three OECD countries, gaps for both groups decreased by at least 25% between 2007 and 2017. At the same time, however, attitudes towards migrants and ethnic minorities have become more polarised.

In any event, the full economic and social inclusion of disadvantaged groups remains an elusive goal. Progress on labour market outcomes is uneven and in most countries, substantial gaps remain not only for women and older workers, but also for people with disabilities and for migrants and their children. Furthermore, only a small majority of people in the OECD (55%) believe their neighbourhoods are good places to live for ethnic minorities, LGBT people and immigrants.

COVID-19 has exposed that women and minorities are not only more exposed to health risks, but also in a more vulnerable situation in the labour market. They are often in more precarious and unstable forms of employment, which in some cases has left them without or with weak access to social protection. A disproportionate share of women and migrants, in particular, are also employed in certain sectors such as hotel and restaurants which have been particularly hard-hit.

There are evident economic and social gains from better inclusion, whereas the business case for diversity is less evident

Besides the obligation to ensure inclusion rooted in social justice, excluding diverse populations from the labour market comes at a high cost. Much could be gained by fully utilising and developing the potential of disadvantaged groups in the labour market and society at large – especially in the context of population ageing. While there is thus a strong macroeconomic case for diversity, the business case for more diversity is less clear-cut. Existing research at the firm level has largely focused on assessing the impact of foreign‑born workers and women on firm productivity and innovation. While the impact of diversity on firm performance tends to be positive and higher in knowledge‑intensive, high‑skilled, and innovation-driven sectors, it may not be in other sectors.

However, studies which focus on outcomes provide little insight about the processes behind how diversity is managed on a day-to-day basis. Finding that diversity does not boost productivity in some sectors might be because companies have not yet found ways to effectively bring together different perspectives, ideas and networks to maximise the potential of their diverse workforce. Making the most of diversity is not a simple ‘numbers game’ of increasing staff diversity, but depends on whether employees feel respected and valued, how discriminatory actions are sanctioned, and what incentives and policies are put in place to foster equality of opportunity.

OECD countries have implemented a wide range of diversity policies and strategies

Most countries have gone beyond anti-discrimination legislation and implemented additional diversity measures, recognising that anti-discrimination policy alone cannot remove structural obstacles for disadvantaged groups. While it is important to fully implement this legislation, making the most of the diversity of our societies cannot be done by only focussing only on what people and companies should not do but also promote pro-active efforts by all stakeholders.

Given the fact that promoting diversity at the firm level is not always straightforward, many governments seek to strengthen the business case for companies. Most OECD countries reward firms’ commitment to diversity with labels and awards. In addition, many countries provide financial incentives, e.g. subsidies and tax breaks, to firms that hire certain diverse and/or disadvantaged job candidates and promote supplier diversity in public procurement policies. Over the past ten years, European countries, in particular, have gone beyond positive incentives for firms to foster diversity by introducing quotas for specific sectors or positions, mostly for women and people with disabilities. Furthermore, the majority of OECD countries have implemented diversity strategies to increase representation of various disadvantaged groups in public administration.

Existing frameworks must better differentiate the needs of diverse groups

Despite the variety of instruments in place, whether diversity policies actually work in practice and why is still under-researched. This is partly due to few countries evaluating or monitoring the impact of existing policies. Yet, understanding “what works” for which groups and why is crucial. Evidence suggests that existing diversity measures often disregard the considerable heterogeneity both between and within groups and consequently have unequal effects on diverse populations. For example, evidence shows that affirmative action programmes in the United States have benefitted white women more than ethnic minorities. Quota regulations, which have proven effective in getting more women in corporate boards, can be counterproductive when applied to other groups, such as people with disabilities. Such findings demonstrate that there are group-specific barriers, which cannot be addressed through “one-size-fits-all” diversity policies.

Crucially, most existing diversity policies tend to neglect socio-economic disadvantage. Studies on access to higher education suggest that diversity policies primarily benefit the most privileged within an ethnic minority group, e.g. those from families with relatively high incomes or high levels of education. While the principle of equal opportunities should apply to people of any socio-economic background and status, policies fail to help the most disadvantaged within minority groups will not end injustice. Finally, policy makers have to face the danger that disadvantaged individuals who do not happen to fall into the category of any particular “diverse group” may feel left out and discriminated against. Diversity policies, therefore, can only be one part of a broader package of policies to promote equal opportunities among all members of society.

Against this backdrop, the following lists summarise some key actions that have been identified as crucial for effective corporate and public policy in making the most of diverse societies. For some specific groups – women, people with disabilities, and older workers – the OECD Council has approved targeted recommendations.

Actions for employers seeking to make the most of a diverse workforce

Action 1: Communicate clearly about the rationale for diversity policies

• Counter the persistent misconception that diversity policies only benefit women and minorities and come at the detriment of majority groups by showing how they can benefit everyone.

• Maintain that diversity is not an end in itself, but that the ultimate objective is to strengthen equality of opportunity by ‘widening the gate’ rather than lowering the bar.

Action 2: Reach out to potential applicants from diverse backgrounds and encourage them to apply to jobs

• Invest in outreach to groups who are under-represented in a given sector or job field and who may not have the necessary professional networks, e.g. by organising targeted job fairs and recruitment campaigns.

Action 3: Develop comprehensive diversity strategies

• Develop diversity action plans targeting recruitment but also retention and career progression to ensure a comprehensive approach towards diversity in the workplace.

• Ensure that these strategies contain quantifiable goals, commitment from upper management and mechanisms to ensure accountability for targets.

Action 4: Tackle discrimination in the hiring process and in the workplace

• Ensure equality of opportunity in recruitment by tackling discrimination and unconscious bias, setting up diverse selection teams and interview panels, and strengthening recourse mechanisms for potential victims of discrimination.

• Support internal staff networks that promote diversity and inclusion as they can represent the interest of groups better.

Action 5: Consider intersectionality in diversity management

• Recognise that people have multiple identities that are necessarily more complex than the simplified categorisations often used for practical purposes. For example, disadvantages experienced by ethnic minority women differ from those of white women or ethnic minority men.

Action 6: Ensure broader and more equitable access to diversity measures

• Target disadvantage within groups, e.g. socio-economic status or position within firm hierarchy, to avoid that policies predominantly benefit those in a relatively privileged position.

Action 7: Acknowledge and address possible negative reactions

• Include all staff, regardless of their background, in developing and implementing diversity policies and gather regular employee feedback on diversity policies.

• Recognise that negative reactions do not necessarily arise because diversity policies fail, as social change is often accompanied by conflict.

A 10-point checklist for public action to get the most out of diverse societies

1. Raise awareness of non-discrimination legislation and recourse mechanisms and make sure that these are accessible and effectively protect potential victims from retaliation.

2. Make sure that the public sector is a role model in diversity management and that it adequately reflects the diversity of the society it represents.

3. Ensure broader and more equitable access to diversity measures by considering socio-economic disadvantage within groups and avoiding that policies predominantly benefit those in a relatively privileged position.

4. Develop diversity policies that focus on all jobs, with a particular attention to medium- and low-skilled jobs.

5. Acknowledge that diversity policies are not a ‘quick fix’ to tackle inequalities and frame them as part of a broader approach, notably with respect to improving access to quality education and lifelong learning.

6. Find the right balance between general and group-specific policies and consider the possible stigmatising effects of the latter, as well as the negative repercussions that can result from inadequate choice of terminology in designating the group.

7. Anticipate possible negative reactions towards diversity and develop a proactive communication strategy, also working with other stakeholders, that frames diversity policies within a wider context of equal opportunities for all members of society.

8. Strengthen the business case for diversity, including through appropriate incentives and by ensuring that hiring disadvantaged groups does not incur disproportionate costs for employers.

9. Support companies, notably SMEs, in their efforts to diversify their staff, for example by providing concrete “how-to” guides and “diversity consultants”.

10. Improve data collection on diverse groups in the labour market, including at firm level, to facilitate a better monitoring of the effectiveness of public policies and to identify areas where further policy action is needed.