Renewedjob growth in the automobile industry in the United States appliesthe two-tier wages in two types of workers, newly hired and alreadyestablished employees (Katz,MacDuffie & Pil, 2013).Newly hired employees are put under the tier II Category, and receivelow wages. The second category consists of already establishedworkers called the tier I who receive higher wages than tier II,about one-half of the tier II (Katz,MacDuffie & Pil, 2013). However, the decision to pay more wages to employees depends on thetype of company. A particular company could pay more wages toemployees especially if they are more productive (Milkovich, Newman,& Milkovich, 2002).
Chryslermade the remarks because the two-tier structure allows establishedemployees to get higher wages than new workers (Katz,MacDuffie & Pil, 2013).There is a lack of motivation among employees getting low wages and apossible division between the two groups (Milkovich, Newman, &Milkovich, 2002). Potential drawbacks could entail failure of theorganization to maintain staff morale (Milkovich, Newman, &Milkovich, 2002). Since the contract signed was signed for fouryears, the drawbacks surface.
Non-workersin Orion, have the responsibility of categorizing parts of the carused in assembling Chevrolet Sonic (Katz,MacDuffie & Pil, 2013).They are paid lower wages than tier I workers, about $20 per hour(Katz,MacDuffie & Pil, 2013). Mr. Marchionne perceives that using the workers together with amuch-reduced number of tie II can decrease the labor cost per vehiclefrom $1160 to $72 annually.
Theneed to keep the structure emanates from the fact that it is seen asa solution to the General Motor’s bankrupt state (Katz,MacDuffie & Pil, 2013).Compared to other companies such as Volkswagen, GM pays its workershigher wages (Katz,MacDuffie & Pil, 2013).Volkswagen pays their employees a starting salary of $12 per hourthat is substantially lower than what GM employees get. The laborcost for both companies shows GM`s was higher than that of Volkswagenindicating the need to get rid of two- tier and introduce a newstructure that will reduce labor cost (Katz,MacDuffie & Pil, 2013).The structure is also lowering the morale of less paid workersnegating the need to have a structure with equality.
Katz,H. C., MacDuffie, J. P., & Pil, F. K. (2013). Crisis and Recoveryin the US Auto Industry: Tumultuous Times for a Collective BargainingPacesetter. UNDERDURESS,45.
Milkovich,G. T., Newman, J. M., & Milkovich, C. (2002). Compensation(Vol. 8). T. Mirror (Ed.). London: McGraw-Hill.