Unionized workers are poised to weaken the most controversial element of a 2007 deal between the United Auto Workers union and Detroit’s Big Three auto manufacturers, reversing one of the most prominent examples of a contentious two-tiered employment system that experts say threatens to push down wages across the industry.
A tentative contract agreement for employees at Fiat Chrysler factories would narrow the pay differential between first-tier workers, who were hired under a prior contract and newer, or second-tier, employees, with an eye toward eliminating the gap.
On Friday the UAW's Chrysler council voted in support of the new proposal, but final approval depends on the general membership of the union's general Fiat Chrysler branch. Negotiators reached a tentative agreement the day before, narrowly averting a planned strike at several Midwestern plants.
UAW workers overwhelmingly rejected another proposed Fiat Chrysler contract a week ago, in part because it would have left the tiered wage structure intact. Under the most recent contract between UAW and the carmaker, unionized workers hired after 2007 can earn a maximum of $19.28 per hour, whereas the first-tier workers, hired before the cutoff, earn closer to $28.50 per hour.
The UAW released details of the more recent proposal after the Chrysler council vote. Under this deal, all second-tier workers could earn up to $28 per hour after seven years of employment and what it termed a “traditional wage” by year eight.
Fiat Chrysler is not the only major auto company to have a tiered contract. General Motors and Ford, the others in Detroit’s Big Three, also inked tiered deals with UAW in 2007, when the whole industry was under severe economic pressure. First-tier workers at the Big Three account for 10 percent of autoworkers in the United States; 4 percent of autoworkers are second-tier workers in the Big Three, according to an analysis by the labor publication Labor Notes. Together, the contracts cover about 137,000 workers — including a lower-wage second tier that makes up 45 percent of the workforce at Chrysler, 25 percent at Ford and 20 percent at General Motors, according to the Center for Automotive Research.
University of Rhode Island labor historian Erik Loomis told Al Jazeera the UAW was feeling the heat when those tiered contracts were first signed. “The Big Three were producing a decent number of cars in Mexico, and so the threat of capital mobility was a big part of this,” he said. “Given the decline of the UAW, I’m not sure what choice they had at the time."
Such two-tiered contracts became a common practice in the 1980s — Ronald Reagan pushed a tiered scheme on the United States Postal Service in 1984 — and unionized companies outside the automotive industry continue to raise the possibility of a tiered structure when negotiating new contracts. Last month, for example, the United Steelworkers said that the steel giant U.S. Steel is demanding a two-tier health care plan, in which newer employers receive less generous benefits.
Unions have long complained that tiered pay scales tend to bring wages down over time as first-tier workers retire, leaving a larger share of second-tier employees.
Even if UAW rolls back the tiered scheme at Chrysler and other automotive companies, that may not prevent other businesses from proposing similar pay and benefit scales. But it would demonstrate that tiered systems, once implemented, are not irreversible.
If Fiat Chrysler’s current wage structure gets tossed, said Loomis, it will be at least partially because the company has less to lose from paying its lower-tier workers more.
“Car companies are making a lot of money right now,” said Loomis. “Because of declining gas prices, people are going back to buying trucks and SUVs, which are more profitable."
UAW President Dennis Williams said Friday that the union's Fiat Chrysler workers sent a clear message about the tiered system. “We returned to bargaining with a clear mandate to fight for a contract that gives all members a clearly defined path to fair pay,” he said in a statement.
When UAW finalizes its tentative contract, Loomis said, the union might have the momentum to roll back the tiered system elsewhere. “If they manage to get rid of it [at Fiat Chrysler], then I think the UAW’s hand is a lot stronger to get rid of it with the other two as well,” he said.