Seniority, earnings and unions

Abstract

This paper uses a new data source to investigate whether wages rise more with seniority in unionised or nonunionised workplaces. The data distinguish establishments that have incremental wage scales with automatic progression by seniority. For unions with seniority scales, the union wage differential is increasing with seniority. This is not the case for unions without seniority scales. Taking account of this heterogeneity, we are able to recognise previous paradoxical empirical findings. The results provide support for discriminating monopoly models of the trade union and have important efficiency and distributional implications.