TRADE-UNIONS AND SENIORITY EMPLOYMENT RULES

Some, but not all, trade union and insider-outsider models assume that a seniority employment rule is used. We investigate when firm and uni on members gain from such a rule and the consequences of their adoptin g one. Generally, providing a seniority wage scale is also used, they gain if union membership is not too large relative to demand and union bargaining power not too great. Moreover, when outsiders are hired un der a seniority employment rule, employment is at the competitive leve l. These results might explain why bargaining over employment is relat ively uncommon and typically occurs only in industries with declining employment.