Unions,firms, and the return to seniority

Wages generally rise more slowly with experience in union than in nonunion settings. It has been argued that the lower slope of the earnings profiles reflects the preferences of the median worker. It is shown in this paper that the median worker model (assuming a median worker exists) does not lead to a uniformly less steeply sloped earnings profile. Instead, the lower return to seniority reflects the firm’s rational response to the union’s monopoly power. Thus, the lower slope in unionized firms reflects the objectives of firms, not unions, in the bargaining process. I would like to thank Bill Dickens, Bernie Grofman, Shu Kahn, and Donald Martin for useful comments and suggestions.