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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. Joseph G. Altonji & Nicolas Williams, 2005. "Do wages rise with job seniority? A reassessment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
  2. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority and Earnings," Working papers 407, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  4. 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..
  5. 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.
  6. 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.
  7. George J. Borjas, 1979. "Job Satisfaction, Wages, and Unions," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 21-40.
  8. Orley Ashenfelter & James N. Brown, 1985. "Testing the Efficiency of Employment Contracts," Working Papers 573, Princeton University, Department of Economics, Industrial Relations Section..
  9. 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.
  10. 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.
  11. Parent, D., 1995. "Industry-Specific Capiatl and the Wage Profile: Evidence from the NLSY and the PSID," Cahiers de recherche 9508, Universite de Montreal, Departement de sciences economiques.
  12. repec:fth:prinin:350 is not listed on IDEAS
  13. 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.
  14. 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.
  15. Joseph G. Altonji & Robert A. Shakotko, 1985. "Do Wages Rise With Job Seniority?," NBER Working Papers 1616, National Bureau of Economic Research, Inc.
  16. 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.
  17. 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.
  18. 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.
  19. 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.
  20. Farber, Henry S, 1983. "The Determination of the Union Status of Workers," Econometrica, Econometric Society, vol. 51(5), pages 1417-37, September.
  21. 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.
  22. Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, vol. 79(3), pages 536-43, June.
  23. 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.
  24. 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.
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Citations

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Cited by:
  1. Anja Deelen, 2011. "Wage-Tenure Profiles and Mobility," CPB Discussion Paper 198, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Daniel van Vuuren & Paul de Hek, 2010. "Are older workers overpaid? A literature review," CPB Discussion Paper 165, CPB Netherlands Bureau for Economic Policy Analysis.
  3. Mário Centeno & Márcio Corrêa, 2005. "Job Matching, Technological Progress And Worker-Provided On-The-Job Training," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33th Brazilian Economics Meeting] 171, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  4. 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.
  5. Peter Haan & Michal Myck, 2009. "Dynamics of Poor Health and Non-employment," SOEPpapers on Multidisciplinary Panel Data Research 195, DIW Berlin, The German Socio-Economic Panel (SOEP).
  6. 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.
  7. Christopher J. O'Leary & Randall W. Eberts, 2008. "Reemployment and Earnings Recovery among Older Unemployment Insurance Claimants," Book chapters authored by Upjohn Institute researchers, W.E. Upjohn Institute for Employment Research.
  8. 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.

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