Question

Chapter 10 Case Study: Two-Tier Wages—Same Job, Different Pay When domestic auto manufacturers were hit hard by recession and foreign competition, they struggled to control costs and maintain profitability. One response was a two-tier wage system paying new workers significantly less than existing ones doing the same job. What is the future for two-tier wage systems? A New Labor Contract At Ford, General Motors, and Chrysler manufacturing plants across the United States, newly hired workers are earning an hourly wage that may be half that of their more experienced coworkers who perform identical tasks, averaging roughly $19 versus $28 per hour. Their benefits—health insurance, paid time off, and retirement funding—are also less than those of experienced workers. These differences are the result of two-tier contracts where labor unions permit corporations to hire new workers with wage and benefit packages below those earned by veteran employees in the same jobs. Here to Stay? “This is not going away,” said Kristin Dziczek, a labor analyst at Ann Arbor's Center for Automotive Research. “It has allowed the Big Three to reduce labor costs without cutting the pay of workers. Is it good for the health and competitiveness of the companies? Yes. And is that good for job security? Yes.” “If you know you're going to get to the top wage eventually, the [two-tier] system can work,” says Peter Cappelli, a professor at the University of Pennsylvania's Wharton School. “The big problem is when you think you'll never get there.” Although lower-tier workers can move up, there's a lot of uncertainty about how long it takes. The United Auto Workers (UAW) union wants to shorten and clarify the time to jump tiers and close the pay gap between them. Mixed Reactions Labor's reaction to the two-tier wages has been mixed. Although no one is happy about earning 50% less than the worker across the aisle, “Everybody is appreciative of a job and glad to be working,” said Derrick Chatman, a new hire at Chrysler's Jefferson North plant. Before joining Chrysler for $14.65 per hour, he was laid off from Home Depot, worked the odd construction job, and collected unemployment. Gary Wurtz, a line worker at GM's Orion Township, MI, plant, where 40% of his fellow workers receive lower-tier wages, said: “In order to get those guys up, we'll take a signing bonus or profit sharing instead.” That said, two-tier plans still have the potential to divide workers across salary lines. Gary Chaison, a professor of industrial relations at Clark University, points out, “[Lower-tier workers] might even feel sufficiently aggrieved to someday negotiate away the benefits of retired higher-tier workers.” A higher-tier autoworker observed, “After we retire, the next generation may ask, ‘Why should we defend your pensions? You didn't defend our pay when we were young.’” Bridging the Gap For many union members, the rallying cry is “No more tiers!” They want to eliminate the two tiers and move to a higher uniform wage rate for all. The new UAW president Dennis Williams says, “It's time to bridge the gap.” But Chrysler CEO Sergio Marchione takes a very different position. He would prefer to eliminate the higher wage tier altogether as senior workers retire. A Changing Tide Although at first the two-tier contracts looked to be here to stay, it appears that among the Big Three automakers—Ford, General Motors, and Chrysler—there may be a changing tide. Ford was loudest in support of the two-tier system. And while recognizing that dropping the system will increase labor costs, Ford acknowledges that there have been benefits to eliminating the system. Said Joe Hinrichs, Ford's president of the Americas, “One of the great things coming out of the new contract has been that we no longer talk about the differences between an ‘entry-level worker’ and a ‘legacy worker.’ All the workers are the same.” So, although Ford is paying more in wages, it also expects to generate performance benefits by eliminating the system. As Hinrichs said, “That's really good, because one of the things you really need in a manufacturing plant is there to be focus and discipline. Anxiety or distraction is the enemy of process discipline.” Both Chrysler and General Motors have also made tentative agreements with the UAW to narrow pay gaps across the two tiers. Is this change likely to stand the test of time? Will the Big Three go back to the two-tier system? Case Analysis Questions 1. DISCUSSION How do EVPs (Employee Value Proposition) vary for those being paid at different levels in two-tier wage plans? What are the implications of these differences for each phase in the HRM process—attracting, developing, and maintaining a talented workforce? (10 Points) 2. PROBLEM SOLVING If you were a negotiator for the UAW, what would be your “union” position management proposal to eliminate the highest tier in the existing two-tier pay system as senior workers retire? How would you expect the management negotiators to respond to your position? Do you see any room or way to negotiate a compromise or trade-offs that could protect the union's desire for higher wages and meet management desires to control labor costs? Is there any way to forge a shared agreement in this situation? (10 Points) 3. FURTHER RESEARCH Dig into current events, scholarly research, and even financial analysts' reports for information on two-tier wage systems and their outcomes in various industries. Find the pros and cons from both management and union points of view. Look for interviews with workers who express their real feelings about being on each side of the two-tier system. Create a report that summarizes the current status of two-tier plans, what we know about how they work, and what direction we can expect from them in the future. (10 Points)

Answer 1

Answer:

A fundamental head of unionism is "comparable pay for identical work." This suggests people doing similar or commensurate business should get equal hourly or salaried remuneration. There are a couple of uncommon cases to this general rule, in the light of the way that when in doubt a couple of focal points and some piece of wages is incorporated with rank. For example, trip downtime generally increases as a worker procures status. Annuities increase as a worker gets rank. A couple of workplaces have pay rewards subject to an agent's length of organization, generally called life range pay. The other way rank ties into pay are in the "wage development plan." This infers an expert is enrolled in at one pace of pay and over some vague time span, they get a customary compensation increment until they show up at the most noteworthy purpose of the rate. Among open fragment workers, there is consistently a progressively expanded time range until the top rate is reached. It may take 3 to 4 or 5 years. Among amassing workers, the time it takes to get to the top rate is normally prepared for the time it takes to learn and get proficient in the movement.

A basic principle of unionism is "equal pay for equal work." This means that people doing the same or comparable job should receive the same hourly or salaried pay. There are some exceptions to this general rule because oftentimes some benefits and some portion of wages are tied into seniority. For example, vacation time off generally increases as a worker gains more seniority. Pensions increase as a worker gains more seniority. Some workplaces have pay bonuses based upon an employee's length of service, usually called longevity pay. The other way seniority ties into wages are in the "wage progression schedule." This means that a worker is hired at one rate of pay and over a period of time they get regular pay raises until they reach the top of the rate. Among public sector workers, there is often a long time period until the top rate is reached, it may take 3 to 4 or 5 years. Among manufacturing workers, the time it takes to get to the top rate is usually geared to the time it takes to learn and become proficient in the job.

The slogan, "equal pay for equal work" was coined to deal with employer favoritism- attempts to keep workers fighting each other ("how come he gets more money than me") and to combat outright discrimination. Employers for many years openly had different-lower rates of pay for women workers and lower rates of pay for African-American and other minority workers. This massive employer discrimination shows up in the national lower average rates of pay for women and minority workers.

The trademark, "comparable pay for identical work" was established to oversee business predisposition attempts to keep workers doing combating each other ("why he gets more money than me") and to fight without a doubt partition. Supervisors for quite a while direct had various lower paces of pay for women workers and lower paces of pay for African-American and other minority workers. This colossal business partition shows up in the national lower ordinary paces of pay for women and minority workers.

What's new with two-tier pay structures?

• They are basically off the mark since they misuse the possibility of "equal remuneration for proportionate work."
• They cause specialist discontent. In each workplace that has established two-level structures, there is pro disappointment in the light of the way that the lower-paid worker feels tricked that he/she is achieving a comparative work as their associates yet tolerating less.
• Overall notwithstanding the way that it was the business that mentioned the two-level system, the affiliation gets blamed for consenting to it. Whether or not they agreed to it in the light of risks to move the work in case they didn't. It is easier for specific masters to denounce their associates than to charge a boss.
• Agent turnover works taking into account specialist disillusionment. This invalidates the save finances a business gets from the two-level structure, because of consistent planning and lower proficiency.
• Supervisors conceivably increment significant venture finance in costs if there is a significant turnover in agents, thusly exchanging all the more liberally repaid authorities with new laborers that procure less. In any case, turnover really doesn't bolster them. This leads various organizations to demand wage cuts for all laborers.
• As time goes on, as more liberally repaid delegates leave or stop, the compensation rates will continue getting lower, as such erasing significant stretches of troublesome work by the supporters to improve their wages and working conditions.

What should be conceivable around two-tier systems?

• Two-level systems should be struggled against considering the significant number of reasons recorded beforehand. They are horrible for the affiliation and commonly terrible for the association. Affiliation stewards need to teach people around these real factors. Regardless of the way that current specialists may not rapidly be impacted, they will be later on.
• Because of the extraordinary recessionary economy, we are in, various affiliations are reluctant of striking. Risks of reductions or moving the work from time to time power relationship into the difficult circumstance of wrangling around two-level structures. Provided that this is true, here are a couple of clues:
• Restrict a never-ending two-level structure. Keep up a comparative top rate for all agents.
• If fundamental orchestrates lower starting rates.
• If basic wrangle longer development plans to the top rate.
• Make an effort not to give the association the choice to move a couple of individuals speedier along the development plan. This gives them an out in case they are in danger of losing another delegate who they have to keep, anyway who is distressed about the more drawn out development plan. In case the new system the business needs aren't working, make them fix it for everybody.

What's going on with two-tier wage frameworks?

• They are fundamentally out of line since they disregard the idea of "equivalent compensation for equivalent work."
• They cause representative discontent. In each working environment that has established two-tier frameworks, there is laborer dissatisfaction in light of the fact that the lower-paid specialist feels duped that he/she is accomplishing a similar work as their colleagues yet accepting less.
• Much of the time despite the fact that it was the business that requested the two-tier framework, the association gets accused of consenting to it. Regardless of whether they consented to it on account of dangers to move the work in the event that they didn't. It is simpler for certain laborers to accuse their colleagues than to accuse a chief.
• Worker turnover expands on account of representative disappointment. This nullifies the reserve funds a business gets from the two-tier framework, due to consistent preparation and lower profitability.
• Bosses possibly increase major investment funds in costs if there is a major turnover in representatives, in this way trading more generously compensated specialists with new workers that winless. Yet, turnover truly doesn't support them. This leads numerous businesses to request wage cuts for all representatives.
• Over the long haul, as more generously compensated representatives resign or stop, the pay rates will keep on getting lower, in this manner deleting long periods of difficult work by endorsers to improve their wages and working conditions.

What should be possible around two-tier frameworks?

• Two-tier frameworks ought to be battled against in light of the considerable number of reasons recorded previously. They are terrible for the association and generally awful for the organization. Association stewards need to teach individuals around these realities. Despite the fact that present workers may not quickly be influenced, they will be later on.
• In light of the intense recessionary economy we are in, numerous associations are uncertain of striking. Dangers of cutbacks or moving the work some of the time power associations into the hard situation of haggling around two-tier frameworks. If so, here are a few hints:
• Oppose a perpetual two-tier framework. Keep up a similar top rate for all workers.
• In the event that important arrange lower beginning rates.
• In the event that important haggle longer movement timetables to the top rate.
• Try not to give the organization the option to move a few people faster along the movement plan. This gives them an out on the off chance that they are at risk for losing another worker who they need to keep, yet who is distraught about the more drawn out movement plan. On the off chance that the new framework the business needs isn't working, make them fix it for everyone.