Question

Answer the following question after reading over the case study below. Case 10 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.

1) Case Analysis Question FURTHER RESEARCH: (You need to lookup data on reports to support your answer to the question below. Please cite where you get your sources from whether online or books.)

Create a report that summarizes the following:

a) the current status of two-tier plans

b) what we know about how they work

c) what direction we can expect from them in the future.

Answer 1

Two-Tier Wage Systems.

An essential head of unionism is "equivalent compensation for equivalent work." This implies individuals doing likewise or tantamount employment ought to get the equivalent hourly or salaried compensation. There are a few special cases to this general guideline, in the light of the fact that as a rule a few advantages, and some bit of wages is integrated with rank. For instance, excursion time off for the most part increments as a laborer acquires status. Annuities increment as a laborer acquires rank. A few work environments have pay rewards dependent on a representative's length of administration, for the most part called life span pay. The other way rank ties into compensation is in the "wage movement plan." This implies a specialist is enlisted in at one pace of pay and over some undefined time frame, they get a ordinary salary increases until they arrive at the highest point of the rate. Among open segment laborers there is regularly a more extended time span until the top rate is reached. It might take 3 to 4 or 5 years. Among assembling laborers, the time it takes to get to the top rate is typically equipped to the time it takes to learn and get capable in the activity.

The trademark, "equivalent compensation for equivalent work" was instituted to manage business bias endeavors to keep laborers battling one another ("why he gets more cash than me") and to battle out-and-out separation. Bosses for a long time straightforwardly had diverse lower paces of pay for ladies laborers and lower paces of pay for African-American and other minority laborers. This enormous business separation appears in the national lower normal paces of pay for ladies and minority laborers.

What's going on with two-level compensation frameworks?

They are essentially out of line, since they abuse the idea of "equivalent compensation for equivalent work."

They cause worker discontent. In each working environment that has founded two-level frameworks there is specialist dissatisfaction in the light of the fact that the lower paid laborer feels duped that he/she is accomplishing a similar work as their colleagues yet accepting less.

By and large despite the fact that it was the business that requested the two-level framework, the association gets accused of consenting to it. Regardless of whether they consented to it in the light of dangers to move the work on the off chance that they didn't. It is simpler for certain specialists to accuse their colleagues than to accuse a chief.

Representative turnover builds in view of worker disappointment. This nullifies the reserve funds a business gets from the two-level framework, as a result of steady preparing and lower efficiency.

Bosses possibly increase a major investment fund in costs if there is a major turnover in representatives, along these lines trading more generously compensated specialists with new workers that acquire less. Be that as it may, turnover truly doesn't support them. This leads numerous businesses to request wage cuts for all workers.

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 the patrons to improve their wages and working conditions.

What should be possible around two-level frameworks?

Two-level frameworks ought to be battled against in light of the considerable number of reasons recorded previously. They are terrible for the association and typically awful for the organization. Association stewards need to instruct individuals around these realities. Despite the fact that present workers may not quickly be influenced, they will be later on.

Due to the extreme recessionary economy we are in, numerous associations are hesitant of striking. Dangers of cutbacks or moving the work now and then power associations into the hard situation of haggling around two-level frameworks. If so, here are a few hints:

Oppose a perpetual two-level framework. Keep up a similar top rate for all representatives.

In the event that essential arranges lower beginning rates.

In the event that essential haggle longer movement timetables to the top rate.

Try not to give the organization the option to move a few people speedier along the movement plan. This gives them an out on the off chance that they are at risk for losing another representative who they need to keep, however 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.