Two-Tier Wage System Shortchanging Workers? When the auto industry was struggling financially, UAW and Detroit's Big Three automakers negotiated a system giving new employees lower wages and fewer benefits than employees hired before the deal was struck. Host Michel Martin speaks with a local reporter, as well as an autoworker who took a buy-out and was rehired at the same plant.

Two-Tier Wage System Shortchanging Workers?

Two-Tier Wage System Shortchanging Workers?

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When the auto industry was struggling financially, UAW and Detroit's Big Three automakers negotiated a system giving new employees lower wages and fewer benefits than employees hired before the deal was struck. Host Michel Martin speaks with a local reporter, as well as an autoworker who took a buy-out and was rehired at the same plant.


And now, we turn to the industry that has driven Detroit's ups and downs, the auto industry. Like the city itself, the Big Three car companies - GM, Chrysler and Ford - have gone through their own hard times.

Back in 2008, we heard this from then Chrysler CEO Bob Nardelli. This was in a hearing before a congressional committee.

BOB NARDELLI: Chrysler is requesting a $7 billion loan to bridge the current financial crisis, and in exchange, Chrysler is committed to continue our restructuring.

MARTIN: That was then. In 2011, the Big Three reported market share increases for the first time in decades and American Auto Makers posted a 10 percent increase in sales. Part of the restructuring Nardelli talked about was a controversial industry contract with the United Auto Workers that drastically cut wages and benefits for all new hires, essentially creating a two-tier wage system for the Big Three.

We wanted to know more about how this is working out, so we've called upon the Detroit Free Press' Brent Snavely. He reports on the auto industry. Also with us is the president of UAW's local 845, Allison Hug. She took a buyout when Ford was in crisis, but she was later hired back to the same plant as an entry level employee. And they're both here with us and we got in touch with her through the UAW.

Thank you both so much for joining us.

ALLISON HUG: Hi, Michel. Thanks for having us.

BRENT SNAVELY: Thank you. Thanks for giving us both the opportunity to be on the air.

MARTIN: So, Brent, let me just start with you because I think that most people could understand why the auto makers would want to pay lower wages. Why do the auto union - why do the UAW agree?

SNAVELY: Well, if we go back to 2007, which was just one year before that tape that you played with Bob Nordelli there, back in 2007, the Detroit three had been losing market share for many, many years. Their labor costs had been increasing and the UAW recognized that it needed to take drastic - accept drastic actions in order to make the UAW competitive.

And they really turned their attention to looking long term into the future so that they could gain jobs in the future so that both the UAW and the auto makers could survive and they realized that they needed to be partners in that future.

MARTIN: Allison, do you remember the debate over that? You were working at a Ford parts plant when these changes started. Do you remember any debate over that? Did you ever think it would have anything to do with you?

HUG: Not that it would have anything to do with me. We just had to make the decisions and keep the auto companies viable and we did what we had to do.

MARTIN: So as I recall your situation, you were working for a Ford parts plant when the changes started and, at the time, you decided, for various reasons, to take a buyout. But then your plans, you know, for the buyout period didn't pan out. You wanted to start a business that didn't work as you had hoped.

HUG: Right.

MARTIN: So then, after two months, you were hired back to the same plant, this time under new ownership. As I understand it, you're making half the wage, $14 an hour, for doing the same work that you had done at $28 an hour. Is that right?

HUG: At this time, I make $16.50, so at the time I hired back in, yeah, I was making $14, but over the years, I've increased.

MARTIN: But not back to where you were. Could I just ask...

HUG: No.

MARTIN: that makes you feel? When you do the work, are you, like, irritated when you get your check or do you look at it and think, what?

HUG: No. I did what I did and I knew what I was coming back to and that was my personal decision when I went out.

MARTIN: What about the relationships within the plant? Do people know who's making what?

HUG: Oh, sure. I mean, it's like anywhere you get hired. When I hired in in '94, I was making less than the Ford employee that was next to me, so it's a progression.

MARTIN: We're talking about the auto industry's two-tier wage system with Allison Hug, she works in a parts plant near Detroit, and also Brent Snavely of the Detroit Free Press. He reports on this.

You know, Brent, we've caught up with a Ford employee who makes the higher tier wage. He's part of a group that is vocally opposed to it. It's called the Auto Workers Caravan and we were able to grab a quote from him about his take on what the new system says about the company. I'll just play it for you.

ERIC TRUSS: Their motto was if you work for Ford, you should be able to buy their product, but when you're cutting wages like you are now, it makes it hard to purchase products with the increase in the cost of living. So it's hard to have one person raise a family on just the two-tier wage. It just almost can't be done.

MARTIN: That was Eric Truss. So, Brent, to your knowledge, does that represent the attitudes of most of the people that you talk about or talk with?

SNAVELY: I don't know if it represents the attitudes of many that I talk with and one of the things that happens to me as a reporter is that, by default, I get phone calls from the loudest, angriest, most active folks. So it does represent a significant segment, but there are others that are perfectly happy with the entry level wage.

And one of the things I want to sort of back up and underline is, you know, recognizing in 2007 the deal, as you accurately describe it, was new hires would be hired at the lower tier wage. That didn't exist in 2007. And then we went through a recession for a couple of years and very few new hires were hired at that wage for a couple of years.

So this was a major controversy within the UAW for a long time, but it continues to bubble up and become a current controversy now because now is when the Detroit three are actually growing and hiring people at that wage.

MARTIN: One of the things, Allison, that you can't help but notice is that when they are hiring thousands of people apply for the positions that are available. And I'm wondering if that's kind of in your mind. I mean, I know you were rehired, in part, because of the work that you had done previously, your attendance and so forth and your skill, you know, obviously.

But is that part of your mind when you're thinking about the fact that you accepted a lower wage?

HUG: No. Because I know there's progression and we all have to start here and build our way up and we're not going to stay entry level employees. There's that chance and opportunity to get to the tier one Ford again.

MARTIN: Sometimes, does anybody ever think you shouldn't have accepted that wage? Does anybody ever say, oh, you shouldn't have done it. You should have held out or we should have held out? Does that feeling still exist?

HUG: I mean, that came with the negotiating and everything that comes at a higher level, so I signed to do what I did and...

MARTIN: Do you feel comfortable with your decision?

HUG: Yes.

MARTIN: You feel OK with it?

HUG: Mm-hmm.

MARTIN: What do you think? What is your sense of the feelings among the people that you work with? Do you feel that most people are pretty comfortable with it, even if they don't like it, they can accept it?

HUG: They can accept it.

MARTIN: And I understand that the 2011 contract raised wages for entry level employees. You've been talking about that. It also provided for more profit sharing and improved on health care benefits. Are you feeling that? Are you seeing that?

HUG: Oh, absolutely. Yeah. I mean, they've gained so much in this last contract: paid vacation, paid personal time, bereavement, jury duty, co-pays for office visits, things that they didn't have, so...

MARTIN: So you feel like you're making progress? You feel like...

HUG: Oh, absolutely making progress.

MARTIN: Brent Snavely, what about you? I just want to get your perspective on that. Is there a sense in the industry that things are getting better?

SNAVELY: Oh, absolutely. We've now had two years in a row where the U.S. auto sales have increased about 10 percent in 2010, an additional 10 percent in 2011 and forecasts are for about an eight percent increase this year.

And along with that, the Detroit three gained market share - a small amount - but they gained market share, as you said earlier, because they - for a lot of reasons, but one reason is that they've improved their products and so there is a tremendous amount of hope and optimism for a better future.

MARTIN: And I'm going to put you on the spot here and ask you the same question that I asked the mayor earlier, which is, is there a sense that the progress that the auto makers are making, that the industry is making, is that - I don't like the term trickling down, but I'll use it, can't think of a better one - is that it's improving the city, the area, this community? Are people feeling it in the community?

SNAVELY: I would say, no, not yet. But I think it will and to your point about - I mean, this was stunning to me. Chrysler recently announced that it would hire 1,100 additional workers at a plant in Detroit early next year, but they made the announcement recently, so my phone lines get flooded with calls from unemployed people when I write that story.

Chrysler tells me they already have 10,000 job applications on file for those jobs before they announced that they would do the additional hiring, so the level of unemployment in Michigan and in Detroit and in this nation has not recovered and it's not going to recover - best case scenario - for another 10 years to the point - level that it was at in 1999.

So things will get better, but you would need to see such a level of improvement to get back to where things were just 10 years ago that - and it's almost impossible to see that coming. But yes, things will get better, just not back to 1999.

MARTIN: Allison, really briefly, do you think your life is getting better?

HUG: My life is good.

MARTIN: OK. Glad to hear. Well, you look good.

HUG: Thank you.

MARTIN: That's awesome. Allison Hug is the president of UAW's Local 845. She's actually experienced the two-tier wage system on both sides. She was here with us at member station WDET in Detroit for this special broadcast from Detroit. Also with us, Brent Snavely. He covers the auto industry for the Detroit Free Press.

Thank you both so much for joining us.

HUG: Thank you, Michel.

SNAVELY: Thank you.

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