Back to Basics: The state of socio-economic diversity in our sectors

Matthew Barnes looks at why real estate and the legal sector still fall short when it comes to socio-economic diversity. The Social Mobility Commission’s State of the Nation 2021 report this summer confirmed that social mobility in the UK had remained stagnant and was (unsurprisingly) likely to move backwards following the damaging impact of the pandemic. It is well-known (or should be) that the legal and real estate sectors are bound by regulatory requirements to encourage us to act equally and to not discriminate against anyone. The Solicitors Regulation Authority’s Principle 6 is to act “in a way that encourages equality, diversity and inclusion”; and one of the five ethical standards of the Royal Institution of Chartered Surveyors is to treat others with respect and to “never discriminate against anyone for whatever reason”. Progressive law firms and property companies are consistently found in the top 75 of the Social Mobility Employer Index, reflecting their proactive and market-leading initiatives to increase socio-economic diversity within their workforces (the benefits of which we will come on to later). There are also specific sector initiatives, such as Pathways to Law and Pathways to Property, which provide newcomers (from all backgrounds) with a valuable insight into our industries. With that context, this article considers why recent reports still find an acute lack of socio-economic diversity in the legal and real estate sectors. Is there a lag in these reports revealing the benefit of the good work taking place in the sectors? Is it a case of too few companies taking the task to hand? Or is there some other reason? The bad and the ugly Last year, the Bridge Group (a non-profit consultancy that uses research to promote social equality) issued two research reports focusing on socio-economic background in the legal sector and the real estate sector. Both reports found each sector acutely lacks diversity in socio-economic background. The legal sector report, focusing on socio-economic background and progression to partner, found that 53% of partners from the participating law firms attended an independent school. The real estate report, focusing on how socio-economic background affects access to, and success in, the real estate sector, revealed that 33% of senior executives attended an independent school and that, on average, the participating real estate firms had a lower proportion of employees from lower socio-economic backgrounds compared to leading accountancy firms, most leading law firms, and government departments. For comparison, 7% of the UK population go to an independent school and the remaining 93% go to a state school. However, the reality is that progression in any business is limited to the eligible pool within that organisation and the relevant job market. There is an argument that the data from these reports does not reflect the entire legal and real estate sectors because it was limited to 10 leading law firms and 12 leading real estate organisations respectively (albeit using data relating to a five-year period). For example, the SRA’s diversity questionnaire results for 2019 revealed a less acute lack of socio-economic diversity across the legal sector, with 23% of all partners and 21% of all lawyers attending a fee-paying school. However, data from the same questionnaire found that 54% of lawyers in firms that mainly do corporate law attended a fee-paying school, and it is this type of law firm that is typically used by the real estate sector for high-value and complex real estate transactions. Law firms in England and Wales are required to complete the SRA’s diversity questionnaire every two years as a regulatory requirement. It will be interesting to see if there is a shift in socio-economic diversity when the results from this summer’s diversity questionnaire are published. Based on the above, it appears that the real estate and legal sectors need to capitalise on the progressive regulatory, employer and sector initiatives already taking place to address the lack of socio-economic diversity. One key way to do this could be by working together to lobby to change the Equality Act 2010. Equality Act 2010 The 2010 Act (as amended) legally protects people against discrimination because of certain “protected characteristics” – age, disability, gender reassignment, marriage or civil partnership, pregnancy or maternity leave, race, religion or belief, sex and sexual orientation. The Act applies when at work, in education, as a consumer, when using public services, when buying or renting property and as a member of or guest of a private club or association. It is most widely used in relation to work and provision of services. A person’s socio-economic background is not a “protected characteristic”; however, section 1 of the Act does contain a legislative tool called the socio-economic duty, which requires public bodies (but, importantly, not private bodies) to adopt transparent and effective measures to address inequalities that result from differences in occupation, education, place of residence or social class. This socio-economic duty has already been enacted in Scotland and Wales but not in England (although some local authorities, such as Newcastle City Council and the North of Tyne Combined Authority, have adopted the duty voluntarily as if it has been enacted). The suggestion for socio-economic background to become a protected characteristic and for the enactment of the socio-economic duty in England is not new. The Bridge Group, the Social Mobility Commission and many other organisations have made this recommendation previously, but is now the right time for the legal and real estate sectors to collectively lobby for these changes rather than on a piecemeal organisational basis? Reasons to lobby together First and foremost, the sectors should collectively be doing the right thing for society on the basis that where you start in life should not define your future. Clearly, there are barriers preventing access into and progression within our sectors, but these may be removed quicker if there was legislation to prevent discrimination because of one’s socio-economic background during the recruitment and employment lifecycle. Secondly, there are many of advantages to having a socio-economic diverse workforce for employers. The Social Mobility Commission lists these as: 1. Increased performance of employees within your organisation. For example, reports on early career progression in law have found that those who got into the participating firms from lower socio-economic backgrounds were more likely to be the highest performers in their firm compared with their more advantaged peers. 2. A wider talent pool to service a wider range of clients. 3. Increased likelihood of higher employee engagement and lower staff turnover and becoming an employer of choice for high-performing people. 4. An enhanced brand through a diverse workforce and commitment to inclusion and improving society. Finally, the above reasons also fall neatly into assisting law firms and property companies to demonstrate (and to assist their clients in demonstrating) good environmental, social and governance credentials. The diversity, culture and reputation of property owners, occupiers, developers, agents, law firms, management companies, etc can all be used to satisfy an investor’s ESG criteria. In addition, measuring the socio-economic diversity of workforces within or related to a building could be used to demonstrate the social impact of a building. Imagine if investors started to require the sharing of socio-economic data relating to each building from the property owner, the occupier, managing agent, etc (obviously subject to compliance with the General Data Protection Regulation and other data legislation) to demonstrate how a building facilitates social mobility. One could easily adapt data sharing provisions typically used for “green leases” to allow for the sharing of a company’s socio-economic data if the benchmark/indexing could be agreed between the landlord and the tenant. The same data-sharing clauses could even be used in asset management and property management agreements. Next steps Potentially, law firms and real estate firms could collectively lobby: 1. the Law Society (including writing to each of the 13 recently appointed social mobility ambassadors); 2. the RICS; and 3. MPs that represent the constituency within which their offices are located. But before doing so, the sectors need to collectively agree a definition of socio-economic background. Although perceived as difficult, this is not insurmountable, especially working together with input from the legal sector. The sectors even have a head start on this task with the 2010 Act already using the term “socio-economic” (although undefined), suggesting that any change in legislation would not cause too much challenge or change, and the Social Mobility Commission defining social mobility as: “The idea that where you start in life shouldn’t determine your future, and that you have a good chance to do better than your parents. To measure it, we look at what occupation or income your parents had and what occupation or income you end up with.” Regardless of one’s socio-economic background and whether you agree with defining social mobility as being upwards only by reference to income, the lack of socio-economic diversity in our sectors is affecting us all. The chance of positive social change and increased business performance for all is increased if this issue is collectively addressed. What is the Social Mobility Commission? The Social Mobility Commission is an independent advisory non-departmental public body established under the Life Chances Act 2010 as modified by the Welfare Reform and Work Act 2016. It has a duty to assess progress in improving social mobility in the UK and to promote social mobility in England. Matt Barnes is legal director in the real estate team at Brabners Photo by Amy Elting/Unsplash