How New Autoworkers Became Second-Class Employees

Veterans earn twice the pay of newbies who do the same work
Illustration: 731

In 2010, Sharron Chambers was a member of the middle class, earning between $40,000 and $50,000 a year at Chrysler’s sedan plant in Sterling Heights, Mich. Since then she’s had her pay cut in half while doing the same work. She’s been unable to make the monthly payments on her car and house and has lost both. She had to move with her two children into her sister’s town house in suburban Detroit. They had to sleep on a mattress on the floor.

Chambers has the misfortune of being a Tier 2 wage earner, one of more than 30,000 union autoworkers in the U.S. who make about half as much as their 50,000 Tier 1 colleagues. This caste system was created in 2007, when the United Automobile Workers agreed to cut starting wages to help Chrysler, Ford, and General Motors amid a slowing economy and falling truck sales. The contract protected the $28-an-hour wage of existing workers but created a class of employees with less tenure who started at $14. Benefits were pared back, too.

Chambers faced a dilemma in 2010. She could stick with her part-time job paying $28 an hour and run the risk of having her hours cut. Or she could opt for the security of a full-time job at the same plant. She chose the latter. Treated as a new hire, she ended up in Tier 2. “Working in a factory was a really good job,” she says, “and now it has gone away. As lower-paid workers, we feel cheated.”

The UAW will raise the plight of Tier 2 workers in the summer when contract talks begin with Chrysler, Ford, and GM. UAW President Dennis Williams told reporters in December that he wants wage gains for both tiers. “I often listen to companies talking about being competitive,” he said. “The only thing they talk about in public is doing it on the backs of the workers.”

In Detroit just over a decade ago, a new factory hand earned as much as $60,000 a year, enough to buy a new home and put a couple of kids through college. When the UAW agreed in 2007 to the $14-an-hour starting wage, U.S. automakers were struggling and rivals were building plants in Mexico and in the South, where the laws favored nonunion workers. The UAW didn’t have much leverage. The contract set wages back a century: Punch the numbers into a U.S. Bureau of Labor Statistics calculator that adjusts for inflation, and you’ll find Henry Ford paid about the same—in 1914.

By accepting lower pay for new hires, the UAW indirectly gave manufacturers across the U.S. permission to cut wages for nonunion workers. A quarter of auto parts employees make less than $13 an hour for jobs that once paid $18, according to the National Employment Law Project, an advocate for low-wage and jobless workers.

Recent Chrysler hires still make more money than many Americans, though not necessarily enough to join the middle class. A 2011 contract gave new hires $15.78 an hour and capped them at $19.28. Chris Bonk, 21, earns that starting salary at the Sterling Heights stamping plant. He owns a new Ram pickup but can’t buy a home. Instead he’s living with his dad, who makes $28 an hour working at the same plant. “Could I move out and start a family?” Bonk asks. “No way. Not without another income.”

econ_veterans11__C
Illustration: 731

Half of Chrysler’s workers make the Tier 2 wage—vs. 25 percent at Ford and 20 percent at GM—because Chrysler was in the worst shape. Only Chrysler has no limit on Tier 2 workers, and the automaker has hired thousands of them. Class warfare hasn’t broken out on the factory floor, but Chambers says there’s tension. Workers like her feel particularly aggrieved, she says. After Chrysler cut her wages, her income shrank to about $30,000 a year, $6,000 above the federal poverty line for a family of four. “Whatever happened to equal work for equal pay?” she asks. “Morale is very low. It seems every day we hear about someone arguing over something.”

Veteran workers dislike the wage disparity, yet they point out they haven’t had a raise in nine years. In real terms, the average industry wage has fallen 21 percent since 2003, according to the National Employment Law Project. GM is expected to earn $7 billion this year; Ford, $6 billion. In 2014, Chrysler, part of Fiat Chrysler Automobiles, earned an adjusted net profit of $2.4 billion, up from $1.8 billion in 2013. Workers have helped boost productivity to record levels, says the Center for Automotive Research in Ann Arbor, Mich.

As the UAW kicks off contract talks, Williams will feel pressure to get raises for both tiers. Derf Shockley, a 26-year-veteran forklift operator at the same plant as Bonk, says the newer workers need a raise, but so does he. “Without overtime, my pay is just sustainable,” he says. Because Tier 2 workers got a raise in the 2011 labor deal, the veterans want one now. Williams’s challenge in the talks is to make sure neither group feels it was sacrificed for the other.

Sergio Marchionne, who runs Fiat Chrysler, earlier this year called two-tier wages “almost offensive.” His solution? Give everyone the lower wage and pay bonuses tied to earnings. That’s a nonstarter for union leaders.

The bottom line: With contract talks between the UAW and the Big Three set for summer, Tier 2 workers already are a hot issue.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE