A most egalitarian profession: pharmacy and the evolution of a family-friendly occupation

How much of the earnings gap between men and women is because the latter choose jobs and occupations that enable flexibility in their work, predictability in their hours and bounds on their work schedule? Now that women’s years of education exceed men’s and their work experience is almost equivalent, what part of the remaining gender earnings gap is due to the disproportionate demand by women for temporal flexibility?

Policies have been floated in the United States to mandate flexibility in hours and days. Questions have also been raised about the technological changes that reduce the cost to firms of such flexibility and the organizational changes that help to accomplish it. A more market-based approach would be mobilizing workers to vote with their feet by moving to firms that provide family-friendly policies without a substantial loss in earnings.

Temporal flexibility implies greater linearity of pay with respect to hours: doubling the number of hours doubles the pay. A non-linear or convex pay structure would mean that doubling the number of hours would more than double the pay – and thus the hourly wage would increase with more hours.

Making workers better substitutes for each other would decrease the cost of temporal flexibility to firms and thus to workers. But if workers were more substitutable for each other, would that mean lower earnings? And are the goals of workplace flexibility, family-friendly policies and well-paid jobs inconsistent?

Evidence from large-scale surveys of pharmacists

To answer these questions, we have been studying occupations that mainly employ college graduates. Our goal has been to see how the organization of work and pay has changed as more women have entered these occupations and increased the demand for workplace flexibility and family-friendly policies.

Ideally, we want to study professions that have seen an increase in the fraction of women and that are also highly paid. The occupations need to have been large enough both today and in the past to provide adequate sample sizes. We want to learn if occupations with these characteristics have shifted at some point from non-linear pay structures to more linear ones.

Our research has focused on pharmacy because it meets these conditions and offers the additional benefit that we have had access to several large-scale surveys of pharmacists – the Pharmacist Workplace Surveys – covering a recent ten-year period.

Full-time pharmacists today are in one of the highest paid occupations in the United States

We have unearthed many surprising findings. For example, full-time pharmacists today are in one of the highest paid occupations in the United States: in terms of median earnings, the profession is the eighth highest for men and third highest for women.

Our main conclusions are that as the pharmacy profession has become more flexible and as the fraction of women has risen, the profession has become more highly paid relative to comparable professions, the variance of pay within the occupation has declined and the relative hourly pay of women has increased.

Pharmacy has acquired the characteristics of an egalitarian occupation: a small gender pay gap, high earnings and temporal flexibility. We identify three seemingly unrelated changes in the occupation and industry that have been responsible for these features.

The gender earnings gap: what makes pharmacy different

Women were about 8% of all pharmacists in 1960 and they are about 55% today.

We find that the pharmacy occupation has changed for reasons largely exogenous to the relative increase in women and which, in turn, stimulated the increase in women’s employment. Women were about 8% of all pharmacists in 1960 and they are about 55% today. The fraction of women among pharmacy school graduates has increased from 14% in the mid-1960s to about 65% today (see Figure 1).

Figure 1: Fraction of women among all pharmacists and pharmacy graduates

Source: Goldin and Katz (2016), Figure 3. Note: Trend line for the fraction of female pharmacists is a fourth-degree polynomial.

Pharmacist earnings have risen relative to those of most other healthcare professionals ever since the late 1990s. Between 1999 and 2013, pharmacists’ median annual earnings increased relative to 39 out of the 40 healthcare professions listed in the Bureau of Labor Statistics’ Occupational Employment Statistics.

Pharmacists also have the lowest wage dispersion of all occupations in which earnings exceed $60,000 per year (or more than $40 per hour). In addition, the gender earnings gap in the profession is low. The (uncorrected) ratio of female to male (median, full-time) annual earnings has been around 0.92 in recent years (Goldin and Katz 2016, Table 1).

To understand why pharmacy differs from other occupations, we first examine the gender gap for currently practicing licensed pharmacists using the Pharmacist Workplace Surveys for 2000, 2004 and 2009.

Using a series of regression models for log earnings, we study how the gender gap changes as we add alternative sets of control variables. The controls include (log) hours, (log) weeks, dummies for position (owner, manager, employee) and sector (retail chain, independent pharmacy, hospital, other), education (graduate degrees), age as a quadratic, and whether the person has a child.

We measure the earnings gap in ‘log points’. A gap of 0.10 in log earnings is 10 log points, which translates into a 10.5% gap in earnings.

The gender gap in annual earnings for pharmacists largely reflects differences in hours worked.

The raw annual log earnings gender gap is 27 log points using the three survey years, a gap of 30% in earnings. But the addition of log hours per week and log weeks worked to the log annual earnings regression reduces the gender earnings gap to 7.6 log points. This demonstrates that the gender gap in annual earnings for pharmacists largely reflects differences in hours worked.

The impact of shorter working hours

The shorter working week of female pharmacists is the largest single component of the gender earnings gap. Female pharmacists in our sample work 6.6 fewer hours per week than male pharmacists (36.6 hours for women per week and 43.2 for men) for a 20 log point gap and work 0.7 fewer weeks per year (47.5 weeks for women and 48.2 for men) for a 2 log point gap.

Thus, the overall 27 log point annual gender earnings gap consists of 20 log points from gender differences in hours per week and 2 log points from differences in weeks worked per year. The remaining 4.7 log points constitute the hourly wage gap.

The addition of covariates – including ownership of a pharmacy, managerial responsibilities and sector – modestly reduces the raw gender annual earnings gap from 27 log points to 23.5 log points, largely because women are more likely to be employees and less likely to be owners and managers.

A substantial annual earnings premium is apparent for owners (47 log points) and managers (24 log points). But the addition of hours and weeks reduces the owner and manager premium substantially, as does an estimation using hourly earnings. In the hourly estimation, owners earn just 5 log points more than employees and managers just 3 log points more. Earnings of pharmacists today, therefore, are mainly a function of their hours of work not their gender or position.

There are substantial gender differences in pharmacists’ hours worked only for those with children. The gender earnings gap for those without children is 3 log points even without controlling for hours, but the gender earnings gap is 33 log points for those with children. In specifications controlling for hours and weeks, the gender earnings gap for those without children is only 1 log point. Differences in hours worked by gender substantially explain the larger gender earnings gap for parents.

Although male and female pharmacists have similar hours of work at the start of their careers, hours for women soon decline. Total hours for men from their early thirties average around 45 per week, whereas they are about 37 for women. Among women with children of any age, hours of work in the primary job are around six to ten hours fewer than for women without children, until the women are in their fifties.

Part-time work (fewer than 35 hours per week) in all jobs worked by currently licensed pharmacists is about 6% for men and 9% for women at the start of their careers (Figure 2).

Figure 2: Part-time employment for male and female pharmacists

Source: Goldin and Katz (2016), Figure 4, part C. Note: Part-time is defined as working fewer than 35 hours in all employments.

The fraction of part-time workers falls to about 5% for man and rises to around 36% for women. For women with children, the fraction who are working part-time at all jobs remains above 40% until they are in their late forties, showing that those who work part-time when their kids are young continue to do so later in life.

Pharmacy’s gender earnings gap over time

Pharmacy did not always have a small gender earnings gap. The ratio of male to female (mean) earnings for full-time, year-round pharmacists in 1970 was 1.67. Women gained on men over time so that by 2011, the ratio had fallen to 1.16. The ratio for median earnings of male to female full-time, year-round pharmacists was 1.52 in 1970 but 1.10 in 2011.

Two factors have led to this change:

One is that because pharmacists have become better substitutes for each other, pharmacy remuneration has become almost linear with respect to hours and weeks.
Another is the decrease in self-employment and the rise of corporate control.

In contrast to pharmacy, many lawyers and those employed in the corporate and financial sectors are rewarded considerably more if they work long hours. Their earnings are non-linear (convex) with respect to hours worked (Bertrand et al, 2010; Goldin, 2014; Goldin and Katz, 2011).

We use the Pharmacist Workplace Survey data on hourly pay to demonstrate the linearity of earnings in pharmacy with respect to hours worked. We find that there is almost no wage penalty for working part-time and that hourly pay in pharmacy is almost invariant to hours of work.

Using the Current Population Survey Merged Outgoing Rotation Groups (CPS MORG) for 2005 to 2013, we also show that pharmacy has a far lower penalty for part-time work than other occupations among college graduates. Pharmacists earn 26 log points more than other college graduates. The penalty to part-time employment for pharmacists is just 5 log points, whereas it is 25 log points for all college graduates. For women, the penalty for part-time employment for pharmacists is effectively zero whereas it is 20 log points for all college graduates.

Using the earliest CPS MORG samples for 1979, 1980 and 1981, we demonstrate that pharmacists in 1980 had part-time wage penalties of 14 log points, almost identical to that in other professions. The hourly earnings penalty for part-time work in pharmacy has virtually disappeared during the past four decades, whereas it has remained substantial for other college graduates.

Long-run changes in the pharmacy sector

Pharmacy employees became better substitutes for each other sometime after 1980. Why? The pharmacy sector has been transformed since at least the 1970s by three related long-run changes.

The first change is an increase in the scope and scale of drug stores. These changes produced an increase in corporate ownership (for example, CVS, Walgreens and Rite-Aid), a decrease in owner-operated pharmacies and a decrease in the fraction of pharmacists working in independent pharmacies: from 75% in 1957 to 14% in 2009 (Figure 3).

Figure 3: Fraction of pharmacists working in independent practices, by gender: 1957 to 2009

Source: Goldin and Katz (2016), Figure 2. Note: A pharmacist working in an independent practice can be an owner or an employee. An ‘independent practice’ is a unit or series of units for which one of the owners makes most decisions. Independent practices can have several stores, but are not ‘chains’ in the sense that they are not run by large corporations. The fraction in independent practice is obtained by taking the number in independent retail practice relative to all active pharmacists. The trend lines are quadratics.

The decrease in independents means that fewer men are residual claimants and fewer women are part-time employees of the sole proprietor. Almost all pharmacists are now employees.

The second change is the extensive use of information technology systems and an increase in prescription drug insurance, which have enhanced the ability of pharmacists to pass on clients and to be perfect substitutes for each other.

The third change is the standardization of pharmacy products and services. Medications are increasingly produced by pharmaceutical companies, rather than compounded by pharmacists. Greater standardization of medications has lessened the importance of the talents of specific pharmacists.

Lower self-ownership and increased substitutability among pharmacists

We have emphasized aspects of the pharmacy profession that have made its professionals extremely good substitutes for each other, thereby enhancing the ability of employees to pass on clients and patients with little loss of fidelity. In addition, agency problems in ownership have been circumvented through use of the corporate form. The earnings premium for long hours and on-call schedules has been greatly reduced.

Many other healthcare professionals have witnessed similar changes. Physicians, veterinarians, optometrists and dentists have also experienced reduced self-employment. Dental and veterinary practices have increased in scale and many are now owned by chains. But few have had as large a decrease in self-ownership as pharmacy.

The legal and financial sectors have seen less change. The clients of most MBAs, lawyers and accountants do not treat these professionals as reasonably good substitutes for each other, possibly because of non-standard services, poorly designed information systems or cultures that emphasize face-time and personal relationships.

We conclude that increased substitutability among pharmacists is a large part of the reason for the changes we observe. Pharmacists are better able to pass on clients to one another because of uniform training, standardization of products and extensive use of information technology. The result is a decrease in the part-time penalty.

In addition, the growth of large pharmacy chains, mail-order pharmacies and hospitals (and the related decline of independent pharmacies) has reduced the premium to ownership. The fraction of pharmacists who work relatively few hours has increased and the hourly earnings of female pharmacists relative to male ones have risen. These factors led to the creation of a more family-friendly pharmacy profession.