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

  • Katharine G. Abraham
  • Henry S. Farber

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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2368.

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Date of creation: Aug 1987
Date of revision:
Publication status: published as Industrial and Labor Relations Review, Vol. 42, No. 1, pp. 3-19, (October 1988).
Handle: RePEc:nbr:nberwo:2368
Note: LS
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  1. Joseph Altonji & R. Shakotko, 1985. "Do Wages Rise with Job Seniority?," Working Papers 567, Princeton University, Department of Economics, Industrial Relations Section..
  2. Richard B. Freeman, 1981. "Union Wage Practices and Wage Dispersion within Establishments," NBER Working Papers 0752, National Bureau of Economic Research, Inc.
  3. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  4. George J. Borjas, 1979. "Job Satisfaction, Wages, and Unions," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 21-40.
  5. Farrell Bloch & Mark S. Kuskin, 1978. "Wage determination in the union and nonunion sectors," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 31(2), pages 183-192, January.
  6. Hall, Robert E, 1982. "The Importance of Lifetime Jobs in the U.S. Economy," American Economic Review, American Economic Association, vol. 72(4), pages 716-24, September.
  7. Lancaster, Tony, 1979. "Econometric Methods for the Duration of Unemployment," Econometrica, Econometric Society, vol. 47(4), pages 939-56, July.
  8. Richard B. Freeman, 1978. "Unionism and the Dispersion of Wages," NBER Working Papers 0248, National Bureau of Economic Research, Inc.
  9. Thomas Hyclak, 1979. "The effect of unions on earnings inequality in local labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 33(1), pages 77-84, October.
  10. Barry T. Hirsch, 1982. "The interindustry structure of unionism, earnings, and earnings dispersion," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 36(1), pages 22-39, October.
  11. Blair, Douglas H & Crawford, David L, 1984. "Labor Union Objectives and Collective Bargaining," The Quarterly Journal of Economics, MIT Press, vol. 99(3), pages 547-66, August.
  12. Katharine G. Abraham & James L. Medoff, 1985. "Length of service and promotions in union and nonunion work groups," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 38(3), pages 408-420, April.
  13. Ernst R. Berndt & Bronwyn H. Hall & Robert E. Hall & Jerry A. Hausman, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 653-665 National Bureau of Economic Research, Inc.
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