Is Britain's social care insurance hike unfair for Black and Asian workers?

by Hugo Greenhalgh | @hugo_greenhalgh | Thomson Reuters Foundation
Tuesday, 7 September 2021 18:19 GMT

A health worker prepares an injection with a dose of Astra Zeneca coronavirus vaccine, at a vaccination centre in Westfield Stratford City shopping centre, amid the outbreak of coronavirus disease (COVID-19), in London, Britain, February 18, 2021. REUTERS/Henry Nicholls

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Critics say people from ethnic minority groups will be disproportionately affected by the insurance increase because they tend to be younger and lower-paid

* Critics say insurance hike will hit young, low-paid

* BAME workers seen disproportionately affected

* Gov't says reform badly needed as social care costs rise

By Hugo Greenhalgh

LONDON, Sept 7 (Thomson Reuters Foundation) - Black and Asian Britons could be especially hard-hit by plans laid out by the government on Tuesday to hike workers' national insurance contributions to help fund ballooning social care and health costs, campaigners and economists said.

Facing a hefty bill for the COVID-19 pandemic, British Prime Minister Boris Johnson also announced a rise in the tax on shareholder dividends, stressing that none of the country's lowest earners "will pay a penny" in contributions.

But despite Johnson's assurances, critics said workers and families from ethnic minority groups would be disproportionately affected by the national insurance (NI) increase because they are concentrated in lower-income segments.

"An increase in national insurance will have a disproportionate impact on ethnic minority people across the country," said Alba Kapoor, senior policy officer at race equality think-thank the Runnymede Trust.

"Countless Black and ethnic minority workers rely on low-paid and precarious jobs and are likely to be amongst those hit hardest by the rise. Families struggling to make ends meet should not have to fix the social care crisis in this country."

A Runnymede Trust report published in February exposed how wealth distribution in Britain splits along ethnic lines.

"For every 1 pound of white British wealth, Pakistani households have around 50p, Black Caribbean households around 20p, and Black African and Bangladeshi households approximately 10p," the report said.

EXPOSED BY COVID

Johnson said his government's effort to fix the long-term social care costs "so cruelly exposed by COVID" would raise an estimated 36 billion pounds over the next three years, with the money ring-fenced for health and social care costs.

"You can't fix the COVID backlogs without giving the NHS (National Health Service) the money it needs; you can't fix the NHS without fixing social care," Johnson told a packed chamber of government and opposition lawmakers.

"You can't fix social care without removing the fear of losing everything to pay for social care; and you can't fix health and social care without long-term reform."

Critics said Tuesday's announcement of a 1.25 percentage point increase from April on NI contributions would also take a heavier toll on younger age groups, where members of ethnic minorities are also more heavily represented.

In June, policy research organisation Race on the Agenda (Rota) and the Trades Union Congress published a report that showed that Black and minority ethnic (BME) women were almost twice as likely to be on zero-hours contracts as white men.

People employed on such terms have no guaranteed working hours.

"There is lots of evidence to show that BME workers are likely to be at the lower end of the income spectrum and that these communities are demographically young and so are impacted more by measures that target younger workers," said Maurice Mcleod, chief executive of Rota.

"(The NI increase) is a totally unfair burden to place on a generation which will see the price of living and housing going up, while their earnings struggle," Mcleod added, referring to the relative wealth of the so-called Baby Boomer generation.

It will also be a further burden on young workers who have been badly affected by the pandemic, said Helen Morrissey, senior pension and retirement analyst at financial services company Hargreaves Lansdown.

"The cost of paying for care affects the whole family and younger generations often provide support at the cost of their own financial stability, both today and in the future," she told the Thomson Reuters Foundation.

UNPRECEDENTED BURDEN

Johnson was returning to an election pledge to address Britain's creaking social care system, where costs are projected to double as the population ages over the next two decades.

Questions about long-term social care costs have dogged British governments – Conservative, Labour or coalition – for years.

Despite the deep differences over how such reforms should be implemented, for Len Shackleton, professor of economics at the University of Buckingham, the current national insurance system "is well past its sell by date".

For people earning less than about 50,000 pounds per year, employers deduct 12% in NI contributions, but for those earning more, that drops to 2%.

"So clearly, it has a disproportionate impact on people who are lower earners – not very poor earners, but (those earning less) than 50,000 pounds a year," said Shackleton, who is also a research fellow at the Institute of Economic Affairs think-tank.

Demographics plays a part, too, he said.

According to Britain's 2011 national census, while 13% of all white people in Britain were aged over 70, that figure falls to 3.9% of Asian and 4.5% of Black people respectively.

Conversely, for those aged between 18 and 24, these figures are 8.9%, 12.9% and 10.6% respectively.

"As a proportion of the age group, BAME people (aged) 18 to 25 are a much larger proportion, than ... of the 70-plus," Shackleton said.

"So in a sense you could argue - I wouldn't want to go down that line too far - but you could argue that you've got Black and minority ethnic people subsidising white people," he added.

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(Reporting by Hugo Greenhalgh; Editing by Helen Popper. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)

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