Union leaders fear plan will result in top-tier earners losing ground to meet bottom-earners in the middle
Union leaders have waged wars over the two-tier wage system,which keeps entry-level workers on a permanent, lower pay grid. So why — nowthat Chrysler Group CEO Sergio Marchionne wants to end the two-tier wagestructure at the Detroit Three auto plants in the United States — are they soworried?
“A two-tier wage system is completely destructive to theworkplace,” said Unifor’s national president Jerry Dias. “A two-tier wagesystem creates all kinds of dissension on the shop floor. While Marchionne isright in identifying the system as a problem, I don’t agree with his solution.”
Marchionne made mention of his intention at the FiatChrysler Automobiles five-year product plan unveiling in Auburn Hills, Mich.,on May 6. Touching on the issue of the 2015 contract negotiations with theUnited Automobile Workers (UAW), Marchionne reiterated his long-held oppositionto two-tier wages.
“I always have been of the view that the two-tier wage structureis unsustainable in the long term,” he said, advocating the phasing out of theolder, higher tier and tying the new, lower tier to company performance throughannual wage hikes.
“We have to replace the (two-tier) wage structure withsomething that reflects the sharing of the economics of running thisenterprise,” Marchionne said. “I object violently to the notion of entitlementin the wage structure. That is something that is incredibly unwise.”
Canadian union leaders fear Marchionne’s plan to eliminatethe two-tier wage system in the U.S. will result in the top-tier earners losingground to meet the bottom-tier workers in the middle. It’s a proposal thatcould have major implications for Chrysler’s Canadian plants as Unifor gears upfor 2016 contract talks.
During the 2012 contract talks, the union avoided two-tierwages and profit sharing. Instead, it agreed to raise its grow-in period to 10years from six.
Unifor argues its current deal puts Canada’s labour costs onpar with the U.S. — particularly when the lower loonie is considered — but thetwo-tier wage system in the U.S. continues to create pressure for cost-cuttinghere.
“What Marchionne is thinking about is not to bring the lowerwage up,” said Liam Rideout, president of Unifor Local 1285 representingworkers at Chrysler’s Brampton, Ont. assembly plant. “He wants them to meet inthe middle. That’s his idea of getting rid of two-tier wages. And whatever theydo in the UAW is going to have an impact on us, because they’re our directcompetition.”
The company’s uncertain future in Canada is contributing tothe concern. In March 2014 the automaker announced its intention to withdrawall requests for financial assistance in the development of assembly plants inWindsor and Brampton, Ont.
Chrysler still plans to develop and build its next minivanin the Windsor location, and the Brampton facility benefitted from recentinvestments and redesigns of the Chrysler 300, Dodge Charger and DodgeChallenger it currently produces — but the decision to take a step back fromfurther investment has many worried.
Mexico and the United States — both lower-cost jurisdictions— offer automakers millions of dollars in incentives, said Pete Mateja.
Mateja, co-director of the Office of Automotive and VehicleResearch at the University of Windsor’s Odette School of Business and anassistant professor at the institution, argued the federal government must makechanges to attract investment.
“It could be a very difficult time in Canada based on whattranspires” with the UAW in 2015, he said.
UAW workers in the U.S. have been without a wage increasefor close to a decade, Mateja estimated, and a move to phase out the top-tierearning capacity could result in labour action.
“You approach anybody and ask them to take a pay cut, it’snot going to go over well,” he said. “Remember, these workers have not had wageincreases in eight, 10 years. The companies are profitable… and you want peopleto take a cut? Are you out of your mind? The union would be cutting their ownthroats.”
It’s not only the inequity in wages, Mateja continued, butalso the difference in benefits, holiday time and the ability to makecontributions to a defined benefit (DB) pension plan. The inequity is simplyunsustainable in the long term.
And while the decisions made by Chrysler and the UAW in 2015could potentially have a significant impact on the Canadian economy, Unifordoes have an advantage in coming to the table in 2016.
“Canada is in a very fortunate position because of the factthat the UAW is going ahead of them,” Mateja said. “They’re going to be able towatch what happens south of the border. They also have the advantage of theU.S. economy getting stronger, so it could be a greater shift as far as thedevaluation of the Canadian dollar against U.S. currency.”
This positive perspective is shared by Dias. While UAW’sadopting a two-tier wage system made sense at the time given both the companyand the country’s dire financial situation, the decision to bring its startingwage down as low as US$13 per hour kicked off a race to the bottom, somethingDias said “undercut the entire auto sector.”
The elimination of the two-tier system can only benefitthose workers, Dias said, and critics shouldn’t count Canada out.
“We have a highly skilled, sophisticated, educatedworkforce. We have the infrastructure, we have the access to markets, we haveall these wonderful things that make Canada an attractive place to dobusiness.”
