Membership, Seniority and Wage-Setting in Democratic Labour Unions

The dynamic behavior of a democratic monopoly labor union that allocates employment on a length-of-service basis is studied. In the context of a simple model, the author shows that a median voter equilibrium can exist in a union consisting of senority-ranked workers when voting membership depends on past employment. The closed-form wage rule of such a union induces a unit root in the autoregressive representation of employment even if the underlying determinants of labor demand are strictly stationary. On the other hand, "Chesire Cat" or disappearing union phenomena are likely to be limited by the forward-looking behavior of union members and the sensitivity of union membership to employment.