Only by cutting the work week to (first step) 32 hours can US wage-cutting be
slowed or stopped. And unions can only be strengthened by cutting working
hours.
Gene
September 12, 2011
Detroit Sets Its Future on a Foundation of Two-Tier Wages
By BILL VLASIC
DETROIT — They are a cornerstone of Chrysler’s unlikely comeback: 900 employees
turning out a Jeep Grand Cherokee S.U.V. every 48 seconds of the working day at
an assembly plant here.
Nothing distinguishes them from the other workers at the Jefferson North plant,
except their paychecks.
The newest Chrysler workers earn about $14 an hour, compared with double that
amount for longtime employees on the same shift. With the economy slumping and
job creation once again a pressing issue in the White House and Congress, the
advent of a two-tier wage system in Detroit is spiking employment for one of
the country’s most important manufacturing industries.
For many, the opportunity for steady employment is welcome, even at a lower
wage.
“Everybody is appreciative of a job and glad to be working,” said Derrick
Chatman, who makes $14.65 an hour putting tires on Jeeps after being laid off
at Home Depot, working odd construction jobs and collecting unemployment.
What was once seen as a desperate move to prop up the struggling auto industry
is now considered an integral part of its future. The demand for $14-an-hour
manufacturing jobs is providing Detroit’s Big Three automakers with a ready
pool of eager new employees. Last year, Chrysler was flooded with inquiries
about the jobs here, and it froze the list after receiving 10,000 applications.
The companies say the two-tier wages are paying off. Despite the disparity,
there is no appreciable difference in the Grand Cherokees produced on the shift
dominated since last fall by the lower-paid workers, the plant manager says. At
General Motors, the savings from its two-tier workers are crucial to production
that began last month of an inexpensive, subcompact car, the Chevrolet Sonic,
in suburban Detroit.
Two-tier wage systems have been tried in the airline industry and others with
spotty success. Usually the lower wages disappear rather quickly when the
economy picks up. But the arrival of vastly different wage rates in auto
factories is a seminal event in an industry long influenced by a powerful union
devoted to equal pay regardless of seniority.
The new jobs, which are seen as long term, are being watched closely by
economists, executives in other industries and Washington policy makers eager
to increase employment in manufacturing and other areas.
“This is not going away,” said Kristin Dziczek, a labor analyst at the Center
for Automotive Research in Ann Arbor, Mich., a research organization. “It has
allowed the Big Three to reduce labor costs without cutting the pay of
incumbent workers. Is it good for the health and competitiveness of the
companies? Yes. And is that good for job security? Yes.”
Four years ago, the United Automobile Workers agreed to allow Chrysler, G.M.
and Ford to pay lower wages to new hires to help close the cost gap with
foreign carmakers. Now the two-tier arrangement is at the forefront of labor
talks between the U.A.W. and the Detroit companies.
The union’s president, Bob King, has made an increase in entry-level wages a
top priority in negotiations for a new national contract to replace the current
agreement, which expires on Wednesday.
So far, about 12 percent of Chrysler’s 23,000 union workers earn the lower
wage, and over all, 4,000 or so of the 112,000 U.A.W. members are second-tier
hires. Those numbers are expected to grow — and in fact can increase
significantly even under the current contract. The jobs are central to the
contract talks now because they are viewed as a critical element of the
industry’s continued recovery.
The benefits for the lower-tier workers are scaled back as well. They get a
maximum of four weeks paid time off a year, versus five for the longtime
workers. And instead of the guaranteed $3,100-a-month pension a full-paid
worker receives after age 60, the new hires have to build their own “personal
retirement plan” based on contributions from the company of less than $2,000 a
year.
The gap in wages between regular and entry-level workers has created some
dissent in the U.A.W.’s ranks. Some long-term employees have demonstrated
against the two-tier system and called for it to be abolished. Mr. King,
however, has focused on getting meaningful pay raises for the lower tier rather
than eliminating it.
At the big Labor Day parade in Detroit, union activists chanted “equal pay for
equal work,” and some full-paid workers said they were willing to forgo a wage
increase in the new contract to help the lower-tier employees.
“In order to get those guys up, we’ll take a signing bonus or profit-sharing
instead,” said Gary Wurtz, a line worker at G.M.’s plant in Orion Township,
Mich., where 40 percent of the employees are lower tier.
There were some early problems with turnover among new hires who could not keep
up with the intense pace of assembly-line work, according to Pat Walsh, the
manager at Chrysler’s plant here. But the workers who stayed have performed
well. “Our quality numbers have been very good,” Mr. Walsh said. “And our data
doesn’t show any differences per shift or per workstation.”
Workers at Jefferson North said that the pay gap had not created visible
tension. Rather, they say the older workers have encouraged the new hires to
hang tough in hopes of achieving full-wage status down the road.
“They’re just telling us to hold out and that everything is going to get
better,” said Mr. Chatman, the tire room worker.
Mr. Chatman, who is 44 and single, said the security of the job, which includes
the union’s traditional medical benefits, is paramount to him. But he does not
hide the fact that he expects one day to make as much money as his top-wage
counterparts.
“I think they should get rid of the two tiers,” he said. “I hope it’s not here
to stay. I hope it was just a steppingstone to get things back going again at
Chrysler.”
There is no hard timetable for the lower-paid workers to move up to full-wage
status, but it could take years. As part of the government’s bailout of G.M.
and Chrysler, the union agreed that no second-tier worker can move up until
2015 at the earliest. At Ford, which did not receive federal aid, the current
U.A.W. contract allows the company to fill 20 percent of its union jobs with
lower-paid workers before it moves any into the top tier.
Experts on two-tier arrangements say that advancement opportunities are
critical to the system’s success.
“If you know you’re going to get to the top wage eventually, the system can
work,” said Peter Cappelli, a professor at the Wharton School at the University
of Pennsylvania. “The big problem is when you think you’ll never get there.”
For now, employees like Mr. Chatman are exhilarated by their steady paychecks
and the emotional reward of being part of Chrysler’s turnaround. He was
recently promoted to be a team leader in the plant, which involves facilitating
the efforts of 10 other employees, including two full-wage workers (no
additional pay).
He can’t help smiling every time he sees each shiny new Grand Cherokee, one of
Chrysler’s top-selling models, roll off the line. Still, it’s tough to accept
that his entire annual salary of about $30,000 is not enough to afford the
least expensive Jeep made at Jefferson North.
“It would be a shame to work at Chrysler,” he said, “and not be able to drive a
Chrysler.”
Nick Bunkley contributed reporting.
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