Understanding the Lack of Ethnic and Gender Diversity in the UK Investment Sector

We document that the lack of diverse employees in the investment sector does not likely result from a shortage of talented diverse candidates graduating from UK universities. We compare occupations in investment management to other occupations that require similar skills and backgrounds (which we call substitutes). We find a better representation of women in these substitutes, which offer more flexible working conditions and are perceived as involving lower levels of stress than investment related occupations. Using data from the Labour Force Survey, we confirm a correlation between working conditions and the proportion of women across 532 occupations. However, we cannot distinguish whether women sort themselves into these jobs or whether these jobs are the only ones available to them. Working conditions and the proportions of ethnic minorities across occupations are, however, not correlated in our sample. Further, ethnic minorities, especially women, have the highest levels of unemployment which cannot be explained by their levels of education. Overall our results show that gender is a larger differentiator than race in the diversity representation gap that we observe in sectors like investment management