Two Tier Wage

The extent of the renewed job growth of the automobile industry in the United States is in part related to the use of a two-tier wage system along with the increase in car sales. The reduction in labor costs per car allows for a significant savings for the automobile companies. GM can save nearly four-hundred fifty dollars on each vehicle in reduction of their labor cost due to the two-tier system. GM could in a total year save nearly seventy-two million each year that allows for the U.S. automakers to be more competitive within the global market.

Chrysler and Fiat CEO Sergio Marchionne stated it best, "Long-term, the two-tier system is not a viable structure. It creates two classes of workers within the plant. It doesn't work in the same direction we are working...to get this organization to work in unison." The drawbacks he was referring to was the system being two separate classes, one paid higher and the other lower. At the time, the move was made for a two-tier system may have been necessary, but it could create feelings among the two-tiers. It could create feelings of animosity, high turnover, jealousy, and poor employee morale among employees and against the organization.

The disadvantages and feelings that come with creating separate classes, Tier I employees who may make significantly higher wages along with Tier II who were hired after the negotiations and new hires. The compensation and benefit difference can create hostility and inequality among the employees. The lower employees may feel they should get equal pay for equal work. The poor employee morale, high turnovers, and animosity among the two-tiers run counterproductive to what the company is trying to accomplish. The disadvantages and feelings do not allow the automakers to be efficient and productive on top of their employees being satisfied with their work.

I would think that Mr. Marchionne would also have issues with using non-GM employees within the factory as well. He is not a fan of the two-tier wage system and according to an auto blog, would like to be able to discard the two-tier wage once Chrysler gets back on its feet in the auto industry. I think that these jobs could be filled with displaced automobile assemblers rather than non-GM personnel. I am sure that those that lost their job would rather make less money than no money at all. The use of another work class outside of the tiers can also lead to even more bad morale among employees along with non-GM personnel. I do not think that he would think very highly of this approach as a strategy to cut cost.

I would like to think that once these automobile industries get a better footing on competing globally and in a better financial state that they would do away with the two-tier system. I think that it would be a great way to show their employees that they matter rather than another worker in the door or out the door.