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Extent of Job Growth. To what extent is the renewed job growth in the automobile industry in the United States due to the use of the two-tier wages?
It seems like some of the growth is related to job growth but certainly not all of it. Our text book says that Tier 1 employees make about $59 per hour in compensation and Tier 2 employees make around $35 per hour in compensation. Their is a third group of contract workers who make around $20 per hour. If these contract employees were GM employees, they would cost the company more in compensation expenses. These contract workers have also helped the job growth.
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Write My Essay For MeSustainability of Approach. To the degree job growth (and increased car sales that come from more competitive labor costs) is based on two-tier wage structures, how sustainable is this approach? Consider, for example, that Fiat and Chrysler CEO Sergio Marchionne stated that “Long term, (the 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.” Why would Mr. Marchionne make this statement? What are the potential drawbacks of a two-tier structure? When would we expect any such drawbacks to materialize?
Wow, that is a lot of questions. The approach is not sustainable. I cannot say definitively why a man I’ve never met does or doesn’t say or do something, however, Mr. Marchionne probably made the statement because it is true and because he doesn’t want strife between two (or three) groups of employees. He probably believes that a divided house falls, or that successful companies work together as one team to accomplish one goal, rather than working against each other.
Potential drawbacks to this structure are strife and conflict between 2 groups. It is not hard to imagine the higher tier thinking they are paid better and therefore they are better than the lower tier. It would probably be harder to hire new employees for the lower tier because more people would apply for the better paying positions. I’m not surprised if having only 2 tiers would make it difficult for employees to promote from one tier to the next. I assume these would begin quickly. It doesn’t take much to cause workplace conflict.
Use of Non-GM Workers. What about the use of non-GM workers at the Chevy Sonic plant? What might Mr. Marchionne think about that approach? How do you think the UAW and the workers it represents will react to Marchionne’s plan?
I’m not sure why people would work for the contract company if they could earn more working for GM. Mr Marchionne would likely say that this isn’t a good long term option either. I would assume the UAW would not like Mr. Marchionne’s plan because in his plan, all employees are treated well. UAW doesn’t compensate their employees as well as the highest earning GM employees. I would assume the UAW contract employees would like Mr. Marchionne’s plan because they can earn higher compensation with him.
Summarizing the Pressures. Will the two-tier wage structure go away in the near future? Summarize the pressures to eliminate it as well as the pressures to keep it. Be sure to consider labor costs and productivity of workers and plants at other companies and in other parts of the world. You may wish to do some research on the new Volkswagen plant in Chattanooga, Tennessee. Also, consider that the Automotive News estimates that the Ford Fiesta (a competitor to the Chevy Sonic) plant in Cuautitlan, Mexico may have labor costs as low as $150 per vehicle.
Companies will like this option because they can save on labor costs and still charge a fortune for new vehicles. This means that the companies get to keep more profit. Employees will not like this because everyone will want the most compensation, but not everyone can have the most compensation. My guess is this won’t last long because factory workers are often in unions. Unions are for all or most employees to band together and demand better pay and working conditions.
