Around the world, women with equivalent abilities and qualifications earn 80 percent or less than men.1 However, new research from NYU Stern Professor Lisa Leslie finds that this gender pay gap is not uniform among all female employees and reverses into a pay premium for certain women; the small subset of women who have been identified as high potential earn up to 10 percent more than their male counterparts.
Through extensive studies of high-potential female professionals at a Fortune 500 company and S&P 1500 organizations, Professor Leslie and her co-authors conclude that the widespread adoption of diversity initiatives by organizations has created a pay premium unique to women who currently hold – or are likely to reach – senior management positions.
Prior research has shown that, in Fortune 500 companies, women hold only 15 percent of executive positions and 8 percent of top earner positions compared to men.2 As a result, there is high demand for women with the potential to reach the upper echelons in organizations where diversity is a strategic goal.
In light of this, Professor Leslie and her co-authors reveal:
- Given short supply and high demand, organizations perceive high-potential women as more valuable than high-potential men for achieving their diversity goals.
- The resulting pay premium for high-potential women is larger in organizations where diversity initiatives are stronger.
- Diversity initiatives create a pay premium for a small subset of women deemed high potential, but they do not eliminate the pay penalty for other women.
“Our study is the first of its kind to document this consequence associated with adopting diversity goals,” Professor Leslie explains. “The findings provide insight into when and why women receive a pay premium. This evidence may prompt a broader conversation within firms about gender equity and whether diversity value should play a role in compensation decisions.”
The article, “Why and When Does the Gender Gap Reverse? Diversity Goals and the Pay Premium for High-Potential Women,” is forthcoming in the Academy of Management Journal.
Source: NYU Stern
1 Arulampalam, W., Booth, A.L. & Bryan, M.L. 2007. Is there a glass ceiling over Europe? Exploring the gender pay gap across the wage distribution. Industrial and Labor Relations Review, 60: 163-186.
Blau, F.D & Kahn, L.M. 2007. The gender pay gap: Have women gone as far as they can? Academy of Management Perspectives, 21: 7-23.
2 Soarea, R., Bartkiewicz, M.J., Mulligan-Ferry, L., Fendler, E., & Kun, E.W.C. 2013b. 2013 Catalyst census Fortune 500 women executive officers and top earners. Catalyst.