Why and When Does the Gender Gap Reverse? Diversity Goals and the Pay Premium for High Potential Women

Abundant research has documented a gender pay gap; women earn less than men, all else being equal. Against the backdrop of an overall female penalty, we propose that the widespread adoption of diversity goals in organizations creates a female premium for certain women. We integrate the economic principle of supply and demand with theory from the field of strategic human resource management and theorize that individuals perceive high-potential women—who have the abilities needed to reach the upper echelons of organizations, where women remain underrepresented—as more valuable for achieving organizational diversity goals than high-potential men and, in turn, reward them with higher pay. Two field studies (Studies 1 and 3) and two laboratory experiments (Studies 2 and 4) reveal a female premium that is unique to high-potential women (Studies 1 and 2), driven by perceptions that high-potential women have more diversity value than high-potential men (Studies 2 and 4), and larger in contexts where diversity goals are stronger (Studies 3 and 4). Our theory and findings challenge the assumption that the gender pay gap uniformly disadvantages women and offer new insight into why and when the female penalty reverses and becomes a female premium.