Prize or Penalty? Reputational Effects of Diversity Scholarships in the Labor Market

Abstract

Many universities and companies use diversity scholarships and pipeline programs to achieve recruiting goals and engage in diversity-related impression management. In contrast to more explicitly race-targeted affirmative action measures, these contemporary diversity initiatives tend to emphasize merit and conceptualize “contributions to diversity” in a broad, race-neutral manner. This paper investigates the reputational effects of diversity scholarships for recent college graduates seeking entry-level jobs. Using a national audit study, I compare the rate at which employers call back applicants with diversity scholarships, applicants with other types of merit scholarships, and applicants with no scholarships at all. I also examine how the scholarship signals differ when applicant names have a Black racial cue versus a White racial cue. I find that while diversity scholarships and non-diversity merit scholarships provide similar reputational benefits for putatively White applicants, Black diversity scholarship winners are called back by employers at a similar rate as Black applicants without scholarships. The reputational boost of the non-diversity scholarship is also smaller for Black applicants than it is for White applicants. The findings contribute to our understanding of how organizational diversity policies shape inequality and illustrate the importance of examining individual-level effects of diversity practices in addition to organizational-level outcomes.