The issue with pay based upon subjective measures is that it can be gamed by the employer in order to "divide and conquer" the workforce and ultimately break the union apart.
Even if management are given a clear set of rules in order to to decide promotions based upon merit, they can normally fudge it in some way to make sure that workers who put fealty to management ahead of loyalty to union get ahead quicker.
Once that gets started it gives other workers an incentive to do the same. Gradually that will chip away at the union's strength as more and more workers defect until eventually management can gather enough scabs, cut the union out altogether and pay everybody 14k/year.
Seniority is not an ideal measure of competence, but it is at least an OBJECTIVE measure that will correlate with competence and (most importantly) can't be gamed by either side.
So it's a normal compromise that makes a lot of sense that unions and management will agree to.
If there were other, better non-gameable metrics I'm sure their negotiations would probably converge on them instead.