The Two-Tier Wage System: Fairness vs. Employment

Wednesday, September 14, 2011

Four years ago, the United Auto Workers Union allowed the three Detroit auto makers to put in place a two-tier system for paying employees, which allowed them to continue to functioning and stay in business as they struggled to stay afloat. New hires were given a salary around $14 an hour, while their tier-one counterparts were making almost double that. The system has helped increase employment in Detroit and kept the auto giants from tanking, but many people say it's unfair.

Elisa (who asked us not to use her last name), a worker at one of the auto giants in the Detroit area, and Mitchell (last name also omitted), who works for GM's Lansing plant in Michigan, speak about their experience as second-tier employees. Peter Cappelli, George W. Taylor professor of management at the University of Pennsylvania's Wharton School, talks about whether this system could work for other industries.


Elisa, Mitchell and Peter Cappelli

Produced by:

David J Fazekas

Comments [14]

B from youngstown

All this speak of two tier but no one speaks of the third tier. You know the one with zero health benefits and makes a third of the two higher tiers. It makes u wonder who ur union really works for. Yeah we pay a monthly dues with improper representation. But it seems the company always wins. Sorry to rant but you know living the American dream a broke autoworker!

May. 03 2012 09:26 PM
LIbby from Miami, FL

What guarantee do we have that the companies, in aim to cut payroll costs and boos their bottom line, will not gradually replace their entire workforce with all new employees?!
Yes. We all have to be thankful, etc. But at what point do we root out the injustice?
The US is slowly becoming Feudal medieval Europe.

Sep. 15 2011 01:14 PM
Jacquie from Fall River, MA

I work for a multi-BILLION dollar telecommunications company who has in no way been affected by this slump in the economy. Yet they are trying to cut our pay, benefits and job security. Why would Americans be willing to accept less when our business are making record profits (and NOT paying taxes on them, the company I work for was in the top 10 companies who got tax rebates & cuts)? I'm tired of hearing about the sacrafices American citizens are expected to make. When are the American business going to become "good American citizens"?

Sep. 15 2011 09:33 AM
Jim from Miami

Children in this country have been spending their parents inheritance. Our standard of living for a long time Has been and still is among on the highest in the world, I work the trades Where no teenagers or 20 year olds will dig or learn the menial portions of the blue collar crew. A roofer or plumber in Miami has to work in an environment much worse than a union autoworker. I am recently divorced, my youngest child who was perfectly normal 3years ago developed a genetic disease called ald, and is now blind, quadriplegic, and has a feeding tube. My other son called me from Kandahar yesterday but had to hang up because of an RPG attack. But I'm thankful for what I still have. Try considering what you have instead of what you don't. Americans need to stop whining so much.

Sep. 15 2011 12:06 AM
Mark D'Andreta from Detroit

I have an issue with the characterization in the way the story was presented. Eluding to the fact that white collar workers in the Detroit automotive industry have not suffered or made concessions. Pay may have only been cut 10%, but tens of thousands of white collar jobs were purged. Those of us that survived now do the work that was previously done by two or three people. These time have impacted us all. Until we realize we are all on the same ship working for the same goal this divisive union versus management mentality will continue to undermine our mutual success.

Sep. 14 2011 09:20 PM
Jane from Michigan

If anyone is interested in seeing the perspective of a shop floor worker, check out
Stepchild in the Promised Land: Notes from a Tier-Two Autoworker addresses many of the issues that listeners have mentioned. Health care, wage parity, etc.

Sep. 14 2011 10:43 AM
Ed from Bedford, NY

Turner's -- and Obama's -- positions on restructuring Medicare and other entitlement programs, leaving current and near-retirees alone but changing the rules for new and younger workers, is an example of a two-tiered system in a different context. This is nothing new: in labor negotiations this is known as "selling the unborn." Unfortunately, it appears to be a sign of the times -- or of the future.

Sep. 14 2011 09:47 AM
Anne from Texas

Elisa's comment about how white collar workers do not have to deal with a "Two Tier" system is false. I don't want people to think I'm whining about my current position, I just want to illustrate that white collar workers deal with the same issue just in a different way. Using myself as an example, when I graduated from college I was looking for a job and interviewed for a job that I was told I was overqualified for. I stated that I thought I would really enjoy the work, which was true, but in reality I just needed a job. I work in a small office for a larger company and make the same money as my 1 colleague. However, I have a relevant undergraduate degree for this job as well as an MBA and my colleague and immediate superior both just have undergraduate degrees that have nothing to do with the industry we are in. I'm happy that I can put food on the table and pay my bills, but I would like to have a position in the future that is a real MBA job.

Sep. 14 2011 09:43 AM
Nancy from Michigan

I am a professional - with a master's degree in the medical field. I was "hired" as a contractor seven years ago. That meant I got a good hourly wage, but have to pay my own social security (usually your employer pays half of it) and I get no benefits. No vacation or sick days, no worker's compensation when injured, no unemployment insurance, no pension, no health insurance...) I do the very same job of people who have all of those benefits.

The "carrot" for taking the job was that eventually, many get really hired and get all of those benefits. That never happened. Now we have been forced to work for a PEO - a company that does nothing but write our checks (none of us have ever gotten through to the company by phone). Supposedly, we are now employees of the PEO and we have worker's comp and unemployment - without any credit for years already worked. Our "employer's" half of Social Security taxes are now paid for us - but we all took a pay cut of more than that amount when the PEO "hired" us. I am tired of being a second-class citizen with those doing the same work and I am looking for a new job.

Sep. 14 2011 09:40 AM
Rob from Windsor Ontario

I'm a member of the CAW and new hires in Canada start at 70% of full rate and grow into it over 6 years. I can't believe the UAW agreed to two tier wages. If you've ever worked in an auto plant you know how hard the work is for $14/hr. Sure people will take the jobs. People will lots of things out of desperation. It's unfair and unnessary. Our plant saved $46 million dollars last year through efficiencies that didn't involve anyone taking a permanently lower rate of pay.

Sep. 14 2011 09:35 AM
Kaki from Providence, RI

I've never been in a job where anyone TALKED about their salary/wages. )Is this a class difference?) I started at IBM as an engineer out of college (clearly white collar), but 20 years later got a job at an Apple store. There, I was making $12/hour and strongly advised not to tell anyone because it was higher than others' starting wages. And what exactly IS a mall, retail job at an Apple store -- white collar? blue? periwinkle?

Sep. 14 2011 09:33 AM
Mark from Michigan

Let me get this right, someone gets a Uniion job for twice mininum wage and is complaining that someone makes more than them? Im sorry but someone sounds a bit greedy to me. Yes someone doing the same job as them can and should make more money than them. If I had three years on the line doing the same job as someone that is a new hire, if we were in the UAW or now I should make more money than someone that has never done that job now shouldn't I? Minunim in the wage in the US is about seven dollars and some change and hour. UAW starts out people at fourteen plus dollars an hour plus benifits, must be ruff being UAW. As the UAW gets rasies every few years depending on their contract everyone getting minuim US wages dont get a rasie. Get over it two teir UAW whiners. You look and sound like US Congress, every year they give themselves a 2% raise or more. At least the UAW only does it every few years for people who make way to much for what they do and they always want more no matter how much they make in the UAW. No matter what the economy looks like or how the auto sale are going they always want more money. Its funny how greedy the UAW auto workers really can be. I'd call you very lucky just having a job, whine some more and see how little pitty you will get from your co-workers that the God they still have a job and food on the table nd a roof over they head. Give up the greed whining and see what happens.

Sep. 14 2011 09:27 AM
Liz from Miami

I know several people in my office who have been working at my employer over 15 years and they would love to be making the hourly wage that your guests make! I understand their frustration on salary; however; they need to be grateful they have job and insurance! I have a new perspective on my job and salary with the way the economy is.

Sep. 14 2011 09:20 AM
Tyra from Quantico VA

Something has got to give.... a two tier system may not be "fair" but having a job is better than being jobless and all the extenuating circumstances that contributes to in the long run.

What the unions are doing is smart because they have finally realized that the status quo will kill the industry if over priced labor continues. If people think its unfair they are always more than welcome to go somewhere else and find a job I suppose.

But then again, making $14 an hour in the present economy is pretty darn good money esp if they are technically unskilled labor (no technical training for their position) and a heck of a lot better than making minimum wage. They also fail to take into account their benefit package including medical as part of their "hourly wage" that they don't see. So in reality with their benefit package they are probably making more like $20 a hour.

Sep. 14 2011 09:05 AM

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