How can union firms both lose jobs at faster rates than non-union firms and have no greater likelihood of going out of business? Unions try not to ruin the companies they organize. They agree to concessions at distressed firms to keep them afloat. However, unions prefer layoffs over pay cuts when a firm does not face imminent liquidation. Layoffs at most union firms occur on the basis of seniority: Newer hires lose their jobs before workers with more tenure lose theirs. Senior members with the greatest influence in the union know that they will keep their jobs in the event of layoffs but that they will also suffer pay reductions. Consequently, unions negotiate contracts that allow firms to lay off newer hires and keep pay high for senior members instead of contracts that lower wages for all workers and preserve jobs.