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Returns to Seniority in the Union and Nonunion Jobs: A New Look at the Evidence

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  • Katharine G. Abraham
  • Henry S. Farber

Abstract

One of the most prominent features of U.S. unionism is the key role played by seniority. However, in cross-sectional data, the positive association between seniority and earnings is typically much stronger for nonunion workers than for union workers. This finding has puzzled previous researchers, since it seems inconsistent with the generalization that seniority is more important in the union sector than in the nonunion sector. We show that standard estimates of the return to seniority are likely to be biased upward and argue that the bias is likely to be larger in the nonunion sector than in the union sector. Corrected estimates imply that the return to seniority is, in fact, larger in the union sector than in the nonunion sector.
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  • Katharine G. Abraham & Henry S. Farber, 1987. "Returns to Seniority in the Union and Nonunion Jobs: A New Look at the Evidence," Working papers 458, Massachusetts Institute of Technology (MIT), Department of Economics.
    • Handle: RePEc:mit:worpap:458
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    Cited by:

    1. Reich, Michael, 2012. "The Rising Strength of Management, High Unemployment and Slow Growth: Revisiting Okun’s Law," Institute for Research on Labor and Employment, Working Paper Series qt8sc8s1z1, Institute of Industrial Relations, UC Berkeley.
    2. Anabela Carneiro & Pedro Portugal, 2006. "Earnings Losses of Displaced Workers: Evidence from a Matched Employer-employee Data Set," CEF.UP Working Papers 0607, Universidade do Porto, Faculdade de Economia do Porto.
    3. Krusell, Per & Rudanko, Leena, 2016. "Unions in a frictional labor market," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 35-50.
    4. David Margolis & Christophe Starzec, 2005. "Les prestations sociales et l'offre de travail: Y a-t-il une trappe à inactivité?," Post-Print halshs-00202293, HAL.
    5. Michael Reich, 2013. "The rising strength of management, high unemployment, and slow growth; revisiting Okun's Law," Chapters, in: Jeannette Wicks-Lim & Robert Pollin (ed.), Capitalism on Trial, chapter 11, Edward Elgar Publishing.
    6. Williams, Nicolas, 2009. "Seniority, experience, and wages in the UK," Labour Economics, Elsevier, vol. 16(3), pages 272-283, June.
    7. Devereux, Paul J & Hart, Robert A & Roberts, J Elizabeth, 2013. "Job spells, employer spells, and wage returns to tenure," Stirling Economics Discussion Papers 2013-01, University of Stirling, Division of Economics.
    8. Hart, Robert A. & Ma, Yue, 2013. "Overtime Working and Contract Efficiency," IZA Discussion Papers 7560, Institute of Labor Economics (IZA).
    9. Björklund, Anders & Åkerman, Jeanette, 1989. "Piece-Rates, On-the-Job Training and the Wage-Tenure Profile," Working Paper Series 246, Research Institute of Industrial Economics.
    10. Lorenz, Wilhelm & Wagner, Joachim, 1989. "Tätigkeit im erlernten Beruf, Betriebszugehörigkeitsdauer und Arbeitseinkommen : eine ökonometrische Untersuchung mit Individualdaten für das Bundesland Bremen und ein metallverarbeitendes Unternehmen," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 22(4), pages 568-575.
    11. Pedro Portugal & Pedro S. Raposo, 2015. "Decomposing the wage losses of displaced workers: the role of the reallocation of workers into firms and job titles," Working Papers w201511, Banco de Portugal, Economics and Research Department.
    12. Brown, Byron W. & Woodbury, Stephen A., 1998. "Seniority, external labor markets, and faculty pay," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(4), pages 771-798.
    13. Don Mar & Paul Ong, 1994. "Race and rehiring in the high-tech industry," The Review of Black Political Economy, Springer;National Economic Association, vol. 22(3), pages 43-54, March.
    14. Lorenz, Wilhelm & Wagner, Joachim, 1989. "Tätigkeit im erlernten Beruf, Betriebszugehörigkeitsdauer und Arbeitseinkommen : eine ökonometrische Untersuchung mit Individualdaten für das Bundesland Bremen und ein metallverarbeitendes Unternehmen," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 22(4), pages 568-575.
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    16. Daniel Bird & Alexander Frug, 2019. "Monotone contracts," Economics Working Papers 1647, Department of Economics and Business, Universitat Pompeu Fabra.
    17. Den Haan, Wouter J. & Kobielarz, Michal L. & Rendahl, Pontus, 2015. "Exact present solution with consistent future approximation: a gridless algorithm to solve stochastic dynamic models," LSE Research Online Documents on Economics 86278, London School of Economics and Political Science, LSE Library.
    18. Maurin, Eric & Givord, Pauline, 2003. "Job Tenure, Wages and Technology: A Reassessment Using Matched Worker-Firm Panel Data," CEPR Discussion Papers 4147, C.E.P.R. Discussion Papers.
    19. Bhanu Pratap Singh & Akash Yadav & Kailash Chandra Pradhan, 2024. "Decomposing the Certified and Uncertified Skill Wage Gap for Production Workers in India," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 888-916, March.
    20. Paul Hek & Daniel Vuuren, 2011. "Are older workers overpaid? A literature review," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(4), pages 436-460, August.
    21. Keith A. Bender & Peter J. Sloane, 1998. "Job Satisfaction, Trade Unions, and Exit-Voice Revisited," ILR Review, Cornell University, ILR School, vol. 51(2), pages 222-240, January.
    22. Lori G. Kletzer, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-136, Winter.

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