Seniority as an Employment Norm : The Case of Layoffs and Promotion in the Us Employment Relationship

This paper investigates why seniority rules have been widely applied to both layoffs and promotion decisions in the USA. While it is shown that seniority rules can be economically efficient under certain circumstances (i.e. seniority rules can have substantive grounds), historical and empirical evidence indicates that (i) they are more popular than economic explanations would allow; (ii) they are not common outside the USA; and (iii) historically, they have often emerged from workers' demands for fair and objective personnel decisions. Based on these findings, this paper offers a normative explanation for seniority rules: they have procedural merits in that they can reduce potential conflicts and facilitate coordination among workers (and employers), especially when selection procedures and results might be viewed by workers as 'lacking objectivity' or as 'unfair'. Thus, seniority can be introduced 'by default' as a focal point for coordination, even if it is not justifiable on substantive grounds. In this sense, seniority rules can emerge on procedural grounds. The historical process of adopting seniority is associated with the selection of an equilibrium in the situation of multiple equilibria, which is usually influenced by a variety of factors, such as historical, political, institutional, cultural ones