Pay attention to the deal struck recently between the top automakers (GM and Chrysler) and the United Auto Workers, the largest union representing autoworkers.
The UAW managed to get GM and Chrysler to restructure the workforce pay system from one in which newer workers were earning significantly less than their more senior co-workers for the same job to one with a single pay scale for all workers.
The two-tier system was set up a decade ago at most American unionized auto plants as a way to cut labor costs. It meant less senior workers would never catch up with their more senior co-workers. The system created resentment and helped make unions less popular. The two-tier system will disappear gradually over several years. Pay is expected to reach $30 per hour for most positions.
Ripple effect: The agreements are expected to put pressure on other automakers in regions where workers typically aren’t unionized. Plus, other unions may also be emboldened to push for higher pay and more equitable pay scales.
Finally, the publicity may spur other workers (even in nonunion settings) to ask for pay increases. The old argument that pay must remain low in order to remain competitive may not hold as much sway as it once did.
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