Why the Average Wage Fell So Fast

The Portuguese pharmacist wage decline was not one uniform pay cut. This chapter focuses on the difference between what happened within worker groups and what happened as the workforce’s composition changed. That distinction supports a more accurate judgment about incidence: established pharmacists lost real pay, but the much lower schedule for new hires—and the growing share of people paid under it—accounted for most of the fall in the average.

An average wage is a snapshot of both prices and people. It changes when the same person earns less, but it also changes when a higher-paid group makes up less of the workforce and a lower-paid group makes up more. In Portugal’s community pharmacies, those two forces operated together. The contract created different tracks; graduate inflows and job churn changed their weights; and the resulting average made the sector look as if everyone had been cut by the same amount, even though the underlying paths were sharply unequal.

The average mixed two different pay paths

The first path belonged to workers hired under the older wage schedule. Their real base wages fell by about 10 percent between 2009 and 2012. That decline had a straightforward purchasing-power component: consumer prices rose 7.9 percent over those three years, while nominal wage floors increased by only 1.3 percent. A worker whose euro wage barely moved would therefore be able to buy less. The study also finds evidence that some incumbents were reshuffled into lower floor categories when the 2010 agreement relabeled the system. The average decline for the older tier was thus not just inflation, and it was not simply a new-hire effect.

The second path belonged to pharmacists hired after the 2012 agreement. Their entry schedule began much lower than the older one and advanced more slowly. When the lower tier was introduced, the average log-wage gap between lower- and upper-tier workers was around 40 log points. For a non-specialist, the useful interpretation is that the lower-tier group earned roughly 40 percent less on the relevant wage measure at that point, although log differences and percentage changes are not identical in every calculation. The gap narrowed somewhat by 2018 as lower-tier floors rose and cushions changed, but it remained large.

The difference was not confined to a first paycheck. The earlier schedule rewarded experience after about a year at each floor. The post-2012 schedule started new pharmacists at a lower floor and kept them at each level longer. A worker entering after the reform therefore accumulated fewer paid years at the higher categories during the beginning of a career. The study’s contract illustration estimates that a new pharmacist paid at the floor in 2012 would earn about 30 percent less over the first five years than someone who entered two years earlier. Two workers could be equally qualified and employed in the same occupation while facing different earnings trajectories because the date of entry determined the schedule.