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Vulnerable Seniors: Unions, Tenure and Wages Following Permanent Job Loss

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  • Peter Kuhn
  • Arthur Sweetman

Abstract

A well known finding in the literature on displaced workers is the apparent “portability” of tenure across firms: controlling for experience and other observable characteristics, workers with high levels of predisplacement tenure earn higher postdisplacement wages (e.g. Kletzer 1989). Using four data sets on displaced workers, we show that this finding is reversed for workers losing unionized jobs. Our finding cannot be explained by firm- or industry-specific human capital accumulation, deferred-pay policies, standard matching models, or by a correlation between tenure and re-entry rates into unionized jobs. We argue instead that it can reflect only two possible processes: negative selection of senior union workers, or a negative causal effect of unionism on workers’ alternative skills. An important implication of our findings is that, despite a much flatter predisplacement tenure-wage profile, displaced union workers’ wage losses increase with tenure at a comparable or higher rate to that of nonunion workers.

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Paper provided by McMaster University in its series Canadian International Labour Network Working Papers with number 20.

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Length: 36 pages
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Handle: RePEc:mcm:cilnwp:20

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  1. Pearce, James E, 1990. "Tenure, Unions, and the Relationship between Employer Size and Wages," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 251-69, April.
  2. repec:fth:prinin:350 is not listed on IDEAS
  3. Farber, Henry S, 1983. "The Determination of the Union Status of Workers," Econometrica, Econometric Society, vol. 51(5), pages 1417-37, September.
  4. Daniel Parent, 1995. "Industry-Specific Capital and the Wage Profile: Evidence from the NLSY and the PSID," CIRANO Working Papers 95s-26, CIRANO.
  5. Brown, James N & Ashenfelter, Orley, 1986. "Testing the Efficiency of Employment Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S40-S87, June.
  6. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February.
  7. Crossley, T.F., 1998. "What Can We Learn from Displaced Worker Data about the Returns to Tenure?," Papers 346, Australian National University - Department of Economics.
  8. Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, vol. 79(3), pages 536-43, June.
  9. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority and Earnings," Working papers 407, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. David S. Evans & Linda S. Leighton, 1995. "Retrospective Bias in the Displaced Worker Surveys," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 386-396.
  11. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June.
  12. Kuhn, Peter, 1988. "A Nonuniform Pricing Model of Union Wages and Employment," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 473-508, June.
  13. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 437-59, July.
  14. Jones, Stephen R G & Kuhn, Peter, 1995. "Mandatory Notice and Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 599-622, October.
  15. George J. Borjas, 1979. "Job Satisfaction, Wages, and Unions," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 21-40.
  16. Freeman, Richard B, 1980. "The Exit-Voice Tradeoff in the Labor Market: Unionism, Job Tenure, Quits, and Separations," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 643-73, June.
  17. Denise J. Doiron & W. Craig Riddell, 1994. "The Impact of Unionization on Male-Female Earnings Differences in Canada," Journal of Human Resources, University of Wisconsin Press, vol. 29(2), pages 504-534.
  18. Addison, John T & Portugal, Pedro, 1989. "Job Displacement, Relative Wage Changes, and Duration of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 281-302, July.
  19. Ruhm, Christopher J, 1990. "Do Earnings Increase with Job Seniority?," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 143-47, February.
  20. Peter Kuhn & Jacques Robert, 1988. "Seniority and Distribution in a Two-Worker Trade Union," Working Papers 615, Princeton University, Department of Economics, Industrial Relations Section..
  21. Lemieux, Thomas, 1998. "Estimating the Effects of Unions on Wage Inequality in a Panel Data Model with Comparative Advantage and Nonrandom Selection," Journal of Labor Economics, University of Chicago Press, vol. 16(2), pages 261-91, April.
  22. Joseph G. Altonji & Nicolas Williams, 1997. "Do Wages Rise with Job Seniority? A Reassessment," NBER Working Papers 6010, National Bureau of Economic Research, Inc.
  23. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-79, July.
  24. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
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Citations

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Cited by:
  1. Paul Hek & Daniel Vuuren, 2011. "Are older workers overpaid? A literature review," International Tax and Public Finance, Springer, vol. 18(4), pages 436-460, August.
  2. Nicholas Lawson, 2011. "Is Collective Bargaining Pareto Efficient? A Survey of the Literature," Journal of Labor Research, Springer, vol. 32(3), pages 282-304, September.
  3. Haan, Peter & Myck, Michal, 2009. "Dynamics of Poor Health and Non-Employment," IZA Discussion Papers 4154, Institute for the Study of Labor (IZA).
  4. Centeno, Mário & Corrêa, Márcio, 2010. "Job matching, technological progress, and worker-provided on-the-job training," Economics Letters, Elsevier, vol. 109(3), pages 190-192, December.
  5. Anja Deelen, 2011. "Wage-Tenure Profiles and Mobility," CPB Discussion Paper 198, CPB Netherlands Bureau for Economic Policy Analysis.
  6. Christopher J. O'Leary & Randall W. Eberts, 2007. "Reemployment and Earnings Recovery among Older Unemployment Insurance Claimants," Upjohn Working Papers and Journal Articles 07-133, W.E. Upjohn Institute for Employment Research.
  7. Till von Wachter & Elizabeth Handwerker & Andrew Hildreth, 2009. "Estimating the "True" Cost of Job Loss: Evidence Using Matched Data from Califormia 1991-2000," Working Papers 09-14, Center for Economic Studies, U.S. Census Bureau.
  8. David Green & Thomas Lemieux, 2007. "The impact of unionization on the incidence of and sources of payment for training in Canada," Empirical Economics, Springer, vol. 32(2), pages 465-489, May.

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