A two tier wage system has turned the auto industry upside down. Today’s workers say no
The workers behind Frosted Flakes, Froot Loops and Raisin Bran are on strike for a better deal – for themselves and for their future colleagues.
At Kellogg’s grain plants in Michigan, Tennessee, Pennsylvania and Nebraska, 1,400 workers have been on strike since October 5. . They say Kellogg can afford good salaries and benefits for everyone, given the profits he’s reaped throughout the pandemic. Kellogg retorts that its workers have some of the best wages and benefits in the industry and that the proposed contract upholds that.
At John Deere, which already has a two-tier retirement system in place, unionized workers have categorically rejected a contract that would have further eroded pension benefits for anyone hired after November 1. More than 10,000 John Deere workers are on strike in the Midwest, demanding a better deal for all workers.
On the west coast, nurses and other health care workers at Kaiser Permanente are also denouncing a proposed two-tier system whereby new recruits would be paid significantly lower wages than current levels. They too point to their employer’s profits during the pandemic to say now is not the time to miss workers.
Two tier wage systems are not new. They proliferated in the 1980s and made a comeback during the Great Recession when unemployment was high. In tough times, companies say it’s essential to move new hires to a lower pay scale and cut benefits to stay afloat.
But in an age when businesses are profitable and workers are in high demand, two-tier systems are much harder to sell. Workers see them simply as an anti-union tactic that will harm not only future employees, but also their own livelihoods.
Detroit automakers used two-speed system to regain competitiveness
When a two-tier pay and benefits structure was adopted by Ford, General Motors and Chrysler in 2007, it was hailed by auto executives as “revolutionary” and “a big step forward.”
Unionized workers, represented by United Auto Workers, voted to approve the change, which did not impact their generous wages or benefits, but significantly reduced those of new hires.
At the time, it was seen as a necessity.
âThe survival of the industry was at stake,â said Kristin Dziczek, senior vice president of research at the Center for Automotive Research.
But with the two tier system came morale issues and other issues. Automakers and unions said it created an unhealthy environment for two categories of workers doing the same job. New workers had no way of accessing the better wages paid to veteran employees. They felt ripped off.
In 2015, Fiat Chrysler CEO Sergio Marchionne called it unsustainable. âWe have to design a career path for people who come into this business that tells them if they work hard they can do it,â he said.
Eventually, two-tier wages were negotiated outside of contracts for production shop workers.
Healthcare workers say in a two tier system, patient care could suffer
In response to Kaiser’s two-tier system and other changes to wages and benefits, unions representing more than 20,000 Kaiser employees in southern California and Oregon are threatening to strike, although no date has yet been set.
According to Kaiser’s proposal, people hired after January 1, 2023 would earn 26% less than current levels. The company said the change would help it “meet future costs” while ensuring that new employees receive on average above market wages.
But workers remain skeptical.
“Especially after the last 18 months, it leaves me with a bad taste in my mouth,” says Alaa Abou-Arab, occupational therapist at Kaiser in Los Angeles, who works in the intensive care unit helping COVID-19 patients regain their health. ability to do basic tasks such as using the bathroom.
He doesn’t want to think about what it would be like to work alongside someone making less money despite the same job, the same training and probably the same amount of student loans, he says.
Abu Arab is concerned that declining wages will make it harder for Kaiser to hire and retain good workers and that patient care may suffer. Most of Kaiser’s employees are also Kaiser’s patients, he says.
âMy son was born at Kaiser Permanente. My wife gave birth there. So we are all in the same boat. There is no in-between, âhe says.