There’s little, if any, doubt by now that the female half of the U.S. workforce overall earns less than the male half, even in the same jobs with identical credentials. The wage gap is worse for some ethnic groups than others, and even going back to school for an MBA rarely helps.
Yet the more the disparity in pay is put under a microscope by various researchers, the more complex and nuanced it looks. One example: The very few female CEOs of the largest U.S. public companies actually earn a lot more than their male peers.
Now it turns out that those women who have reached the top have probably been out-earning their male counterparts for years. That’s because companies making a genuine effort to increase diversity in senior management have apparently been holding on to “high-potential” women — meaning those perceived as having the right skills and talent to move up — at least in part by paying them more than “high-potential” men. On average, says a new study, high-potential women earn 10% more annually than their high-potential male colleagues.
The study, led by Lisa Leslie, who teaches at NYU’s Stern School of Business, looked at pay practices across a variety of industries and found that “the tenets of supply and demand” dictate female up-and-comers’ higher pay. Managers told to focus on grooming women for bigger jobs “perceive high-potential women as higher in diversity value” than their male peers. So those bosses use higher pay as a means of retaining women who have “the ability to reach the upper echelons.”
That pay premium doesn’t spill over to the rest of a company’s female employees. One of the researchers' four separate analyses was a field study of 1,834 male and female employees at the headquarters of an unnamed Fortune 500 company. The organization had won awards for its extensive diversity programs (“e.g., employee networks, mentoring”). And yet, while its total workforce was roughly 50-50 men and women, fewer than 10% of its senior executives were female. After gathering data on performance and pay for each employee, the researchers took into account a long list of variables, including how each employee’s boss rated his or her potential.
The results were striking. Overall, female employees earned 85% of what men earned ($16,798 less per year, on average). By contrast, the female employees with high potential ratings were making 107% of the high-potential men’s pay (an average of $8,874 more per year).
Among employees whose potential was rated “moderate,” there was no difference in pay between men and women. “Notably, only 10% of employees [of both sexes] were rated as high potential,” the study says, “whereas 65% were rated ‘low potential,’ which explains the overall female penalty in the data.”
The study, called “Why and When Does the Gender Wage Gap Reverse? Diversity Goals and the Pay Premium for High-Potential Women,” will appear in a forthcoming issue of the Academy of Management Journal.