This Is the Industry That Will Finally Close the Gender Wage Gap

Commentary about business and finance.
March 17 2014 6:10 PM

The Pay Gap Prescription

Your local pharmacy is closing the wage divide between men and women.

Pharmacist Jeanie Kim, left, consults with a customer at a Walgreens pharmacy on September 19, 2013 in Wheeling, Illinois.
Do pharmacies care whether they're employing men or women? Nope!

Photo by Scott Olson/Getty Images

Ask Harvard economist Claudia Goldin how to close the pay gap between men and women, and chances are you’ll soon be talking about pharmacies. As in CVS. As in Walgreens. As in that drab, fluorescent-lit place you go to pick up some Sudafed or Diet Coke in a hurry.

Jordan Weissmann Jordan Weissmann

Jordan Weissmann is Slate's senior business and economics correspondent.

America’s drugstore counters, you see, are secretly little altars to gender equality. In most well-paid occupations, women earn far less than men. But Goldin’s research has shown that among pharmacists, the average difference is relatively small, especially when measured hour to hour: about 5 to 7 percent. That’s one reason why Goldin—widely considered one of the country’s leading labor economists—calls pharmacy “one of the most egalitarian of all professions today.”

The reasons why female pharmacists fare so well are a bit complicated. But Goldin thinks her close study of the people who fill our prescriptions can help us draw a road map for closing much of the remaining pay gap. “The solution does not (necessarily) have to involve government intervention,” she writes in a paper scheduled to appear in the April edition of the American Economic Review. “It does not have to improve women’s bargaining skills and desire to compete. And it does not necessarily have to make men more responsible in the home (although that wouldn’t hurt).” What it does involve is making the corporate world a bit more like your corner Rite Aid.  

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As President Obama likes to remind us, American women who work full time collectively make 77 cents on the dollar compared with men. That neat, memorable statistic is sometimes treated as evidence of rampant wage discrimination in the U.S. But, in truth, most of the pay gap can be explained by other factors, such as career choice. While American women are generally better-educated than men, they tend to end up in lower-paying fields (and the reasons why could take up a whole dissertation). About 76 percent of public school teachers are female, for instance, compared with just 13 percent of engineers and 6.5 percent of neurosurgeons. After adjusting for details like age, experience, occupation, and industry, Cornell economists Francine Blau and Lawrence Kahn found that women earn about 91 cents on the dollar compared with men.

Still, the fact that women gravitate to less lucrative industries does not explain all of the pay gap. Even when they work in the exact same occupations, women consistently earn less than men. It’s true in law. It’s true in accounting. It’s true in medicine. And much (though not all) of the reason why it’s true can be summed up with one word: babies.

Yes, babies, those vicious little career killers. When women start working, they earn similarly to men. But once they reach their prime years for giving birth and raising children, the divide quickly widens. And well before Anne-Marie Slaughter declared in an instantly famous 2012 Atlantic piece that women still can’t have it all, Goldin and her collaborators were using statistical regressions to carefully document the perils of motherhood for high-powered professionals. In a study of University of Chicago MBAs written with Lawrence Katz and Marianne Bertrand, Goldin found that female business school grads started off earning roughly on par with their male peers. But after 10 to 16 years, they were making 45 percent less per year. Why the yawning gap? Because the corporate world placed a huge premium on long hours—in other words, doubling your workweek would far more than double your salary—and harshly penalized any time out of the labor force. Once they became mothers, the women of Chicago Booth couldn’t keep pace with their male classmates. Many took long career breaks, seemingly because flexible schedules and part-time work were hard to come by.

In keeping with those findings, Goldin’s new paper shows that the size of the pay gap in most occupations is closely associated with how employers reward long hours. In business and finance (shown in red on the graph below), workers are richly compensated for pulling marathon workweeks, and the pay gap looks like a canyon. In tech and some health occupations (shown in green and blue below), their income is less dependent on how much time they spend at the office—a structure Goldin calls “linear pay.” In those occupations, the wage gap is less gargantuan.

140314_$BOX_Goldin_Chart

Which brings us to the pharmacy business. Back in the 1960s, pharmacists tended to be self-employed. They pulled long hours managing their own stores, and, unsurprisingly, they tended to be men, or women who worked for men while earning far less. But then, as Goldin and Katz documented in a 2012 paper, the industry started to change. The chains began to take over—Rite Aid, CVS, and Walgreens helped put mom-and-pop shops out of business, while grocery stores, and eventually big-box retailers like Walmart, also got into the game. As the number of independent pharmacies dwindled, women flooded into the profession, while the hourly pay gap continued to shrink.

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