Thousands of John Deere workers have been on strike for more than a month. Nearly 1,500 Kellogg’s workers likely will celebrate Thanksgiving on the picket line. More than 30,000
The common thread? Tiered wage proposals that help companies cut costs but that unions say cheat new workers out of pay and retirement benefits.
At John Deere and
1. What is a two-tier wage system?
As the name suggests, tiered wage systems create separate pay and benefit tracks depending on when an employee is hired. It’s used almost exclusively in union workplaces, where employers must negotiate over pay and benefits; in non-union shops, employers can make such changes unilaterally.
For instance, a two-tier collective bargaining agreement could give current employees a minimum of $25 an hour, a $2 annual raise for the next four years, and a guaranteed pension. But workers hired after a certain date in the future would only get $20 an hour, a $1 raise each year, and a less-lucrative 401(k) savings for retirement.
Employers favor tiered systems as a cost-cutting measure. Phasing out costly pensions and suppressing wages for new hires without taking away benefits from current workers can save millions every year, depending on the employer’s size.
Kaiser Permanente said last month its proposal would help contain health-care costs for consumers; union workers already earn 26% above average market wages, which contributed to ballooning prices, according to Arlene Peasnall, Kaiser’s senior vice president of human resources.
2. Why do unions dislike them?
Unions operate on a basic principle: Once you give something, you can’t take it away. And that’s exactly what two-tier wage systems ask them to do.
Tiered structures require unions to surrender pay and other benefits they spent decades fighting for. Kaiser’s plan would have slashed pay between 29% and 36% for workers hired in 2023 and beyond, its union said.
Tiered wage systems create a circumstance in which two people working side by side, doing the same job, could be paid very differently. Even when experience is factored in, wage caps often mean that the less senior of the two workers will never have a chance to make as much as his or her peer—creating a permanent underclass of workers and betraying the unions’ doctrine of solidarity.
3. When are two-tier systems used?
Two-tier systems grew in popularity during economic crises, notably the recession in the 1980s.
While it’s hard to say whether two-tier systems have become more popular during the pandemic, it’s clear that unions are less likely to tolerate the scheme when companies are doing well—and right now many are. Kaiser’s annual operating revenue reached $88.7 billion in 2020, compared to $47.9 billion in 2011.
Unions at both companies were able strip out two-tier proposals through rounds of aggressive bargaining. Kellogg’s workers remain on strike.
To learn more:
—From Bloomberg Law
—From Bloomberg News