Last week’s Nation magazine features How Two Tier Contracts Became Labor’s Undoing by Louis Uchitelle, one of the best economics and labor writers in the country. Mr. Uchitelle is a regular contributor to the New York Times in addition to his work at The Nation.
I love ths opening paragraph…
Two-tier wage systems go way back. The Roman Emperor Marcus Opellius Macrinus, in need of a larger army but short on cash, cut the pay for new recruits, forcing them to endure the same battlefield risks as veterans, but at a lower wage. That annoyed the new warriors, and their resentment ignited an army revolt that in 218 ad cost the emperor his life.
Louis then tells the real-life tale of my friend Karl at the GM Wentzville Assembly plant. While two-tier contracts are present in many industries the feelings of the workers involved are similar.
That’s Karl Hoeltge’s attitude. The 22-year-old earns $15.78 an hour on the assembly line of a General Motors factory near St. Louis, under a union contract that will cap his pay at $19.28 an hour five to six years from now. That is, if he hasn’t left by then to pursue his dream, which is to commercialize one or two of the children’s toys he designs in his off hours. Karl’s father, Gary, has worked for years on the same assembly line, and the son says he might be more reconciled to a career at the plant if he could work up to the $28 an hour his father earns. But, he says, “I’ll never catch up to my father’s pay—not if the union allows the present setup to continue.”
It took a combination of the threat of bankruptcy, misguided trade policies, rising health care costs, and other factors outlined in my 2008 op/ed Did The Four Horsemen Destroy The Auto Industry for this concession to be made. For the new hires at Wentzville wages were not the only concession as they will not receive a defined benefit pension or retiree healthcare. These were the legacy costs so discussed during the bankruptcy hearings in Washington D.C. Without these legacy costs full wages for all hourly employees would only total less than 3% of sales. In fact, Wentzville Assembly seniority employees voted against the creation of this second tier of lower wages but the national vote went the other way. To their credit, the majority of these seniority employees still oppose this second tier.
Under the prior agreement, new hires started at 70% of full pay and increased five percent every six months allowing full pay to be achieved in three years. It is the lack of a definite date of wage progression that generates the animosity if not hostility expressed by Karl.
“I’m not a hateful person,” Karl said, “but I’m fairly disturbed by what is happening to me.”
Second tier employees are not the only ones harboring some resentment as many perma-temps described in the article are also disturbed by what is happening to them.
Employers with two-tier wage programs may not meet the fate of Marcus Opellius Macrinus but should be aware that pep talks about how the company is one big family and other such metaphors are perceived as empty words when so many ”family members” are treated like black sheep.