2-tier wages served a purpose, but not anymore
It's unlikely that the UAW and Detroit 3 can eliminate two-tier wages in the next round of contract negotiations. But labor and management should use the opportunity to whittle away at the inequities inherent in the wage system.
Workers performing identical work should not be paid differently simply because of their hiring dates.
The idea was adopted in 2007's extreme duress as a way for U.S.-based automakers to cut labor costs enough to survive. Existing UAW employees kept their hourly pay rate. Anyone hired thereafter got about half that base rate.
Later UAW-Detroit 3 contracts increased profit sharing and other add-on compensation schemes. But seven years later, a huge base wage gap remains between two classes of UAW workers. About a quarter of Detroit 3 UAW workers are classified in the lower tier.
Meanwhile, UAW and automaker executives are not on the same page. Dennis Williams, expected to be elected UAW president this week, wants to eliminate two-tier wages. But first he needs to push for long-deferred base-pay raises to top-tier workers, justify a dues hike and rebuild a strike fund depleted by organizing efforts.
Fiat Chrysler CEO Sergio Marchionne has called two-tier wage structures "unsustainable in the long term" and disruptive to workplace unity. Joe Hinrichs, Ford's president of the Americas, doesn't want to eliminate them, noting big profit-sharing payouts and jobs created using the system.
Two-tier wages are a relic of desperate times. With strong automaker profits, it's harder to justify two-tier wages.
The UAW and automakers may have bigger fish to fry this time around. But ultimately, ending two-tier wages would benefit the entire auto industry.