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Column: A prescription for equitable wages (w/video)

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.

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. 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."

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. 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. 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, workers are richly compensated for pulling marathon workweeks, and the pay gap looks like a canyon. In tech and some health occupations, 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.

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. 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.

The large national chains made pharmacies into incredibly friendly places for part-time work. More than a quarter of female pharmacists work part-time, but hour for hour, they still earn about the same as men. Which is to say, the pay is "linear." There's no special premium for working a 60-hour week.

According to Goldin, one of the key reasons why linear pay works is that pharmacists, although highly educated, are essentially interchangeable. Customers aren't particularly worried about who is filling their Xanax or Lipitor prescription, so long as they're in the hands of a professional. "All the information is there in the computer. The training is standardized," Goldin told me.

For CVS or Rite Aid, it ultimately makes just as much sense to pay two pharmacists $50,000 to work half the number of hours per year as it does to pay one pharmacist $100,000. Already, Goldin points out, industries like health care, real estate, retail banking and brokerage have moved in this direction of making highly skilled workers more interchangeable.

It won't necessarily work for every profession. Pharmacists and anesthesiologists are tasked with finding a set right answer to a particular technical problem: Will this drug cause an interaction? How much sedative do I inject? Those parameters make their work relatively easy to standardize.

"I'm not saying you can do this in everything," Goldin told me. "I'm simply saying that where it can be done, we can see the results." Fair enough. For now, we'll call it an imperfect prescription.

© 2014 Slate

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Column: A prescription for equitable wages (w/video) 03/19/14 [Last modified: Wednesday, March 19, 2014 6:53pm]

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