Wage gap rumblings confront UAW

Williams to attack Tier 2, but it won't be easy

Dennis Williams plans to bridge the wage gap between veteran auto workers and new hires.

DETROIT -- Discontent over low Tier 2 wages kept bubbling up at last week's UAW Constitutional Convention here, despite leadership's efforts to focus debate on organizing transplants, social justice and upcoming national political campaigns.

New UAW President Dennis Williams said he planned to attack the wide compensation disparity between veteran auto workers and new hires during next year's contract negotiations with the Detroit 3.

But the low wages are entrenched. Ford Motor Co. says they fuel sales growth. And Williams declined to say last week how the union might "bridge the gap," as he put it, between the $28 an hour earned by longtime workers vs. the $16 for new hires.

The percentage of Tier 2 workers at the Detroit 3 grew from hardly noticeable three years ago to 25 percent of the combined UAW work force of 130,000. The UAW first agreed with the Detroit 3 to accept lower entry-level wages and benefits in 2007 as Detroit was heading into the Great Recession.

While the provision has helped spur hiring, grumbling over the pay disparity has grown with the number of entry-level workers. Today, about 40 percent of Chrysler's union work force earns the lower wage and benefits package. "No one likes Tier 2," Williams said.

Gary Walkowicz, a bargaining committeeman at the Ford truck assembly plant in Dearborn, Mich., said the only solution is to eliminate Tier 2.

But he concedes that it's a challenge.

Joe Hinrichs, president of Ford's Americas unit, said last month that Tier 2 has fueled growth at Ford, and workers have shared in the resulting profits. He said he is in favor of keeping it.

Fiat Chrysler Automobiles CEO Sergio Marchionne said last month that the pathway to ending Tier 2 is to freeze compensation of veteran auto workers.

But there's a problem with that, Walkowicz said. Longtime auto workers haven't had a wage increase themselves in 11 years.

Walkowicz said the union should start preparing the membership today for a strike if the Detroit 3 won't budge on both issues. "It might take a strike next year," said Walkowicz, who ran for UAW president last week against Williams.

During a contentious 2.5-hour debate on whether to raise membership dues by 25 percent, several delegates opposed the measure because their Tier 2 constituents would feel the pain of the roughly $10 per month extra deducted from their pay. A $16-an-hour job yields gross wages of $33,280 per year without overtime.

Rich Boyer, a delegate who works as a millwright setting up machines at Chrysler's Warren Truck Assembly Plant in suburban Detroit, said the dues increase should wait until leadership proves in next year's auto talks that it can improve Tier 2 wages.

"Actions speak louder than words," said Boyer. Forty percent of his factory's 3,300 workers are entry level.

The dues increase passed overwhelmingly and will raise about $50 million annually for the UAW strike fund by hiking dues from two hours per month to 2.5 hours.

On other occasions, some of the 1,100 delegates in attendance questioned whether the union can, in good conscience, criticize income inequality in society while it permits different pay for members doing the same work.

Williams, who succeeded Bob King as president, knows he has a thorny issue to tackle.

But he said, "We're all committed to eliminating the two-tier system."

You can reach David Barkholz at dbarkholz@crain.com -- Follow David on Twitter: @barkholzatan

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