Two-tier pay system brings reopening of GM plant, reviving hope
A few days before Thanksgiving, hundreds of people from around the country jammed into the idled General Motors Co. plant here, cheering as company and union officials pushed a big red button signifying the reopening of the car-assembly factory.
The ceremony marked a rare bright moment for workers in America’s long-beleaguered auto industry. But there’s a catch: Under its agreement with the United Auto Workers union, GM will be hiring mostly new workers for the plant who will start at $15.78 an hour, about half the prevailing rate paid to the company’s production employees.
A two-tier pay system, adopted by airlines years ago and embraced more recently by law firms, could breed hard feelings among workers paid different rates for doing the same jobs. Economists have a bigger fear that the lower wages could undermine the middle-class living that the UAW took decades to negotiate.
At first glance, the scaled-down pay for some employees seems starkly at odds with Henry Ford’s famous decision nearly a century ago to double daily pay to $5, a move that boosted workers’ morale — as well as their ability to buy Ford cars.
“This is what Henry Ford understood by paying his workers three times more than the industry average,” said Robert Reich, a Clinton administration labor secretary who teaches at UC Berkeley.
What concerns Reich most is that whittled-down paychecks will erode spending power and thus lead to fewer sales, weak hiring and stagnant wages, creating a vicious cycle. “You shoot yourself in the foot eventually,” he said.
But many people here look at the situation differently.
After getting pulverized by the recession and high unemployment, they said the reopening of the GM plant, which originally produced the Saturn brand, had revived hopes in their hard-hit area in central Tennessee.
“You can make $16 an hour or zero dollars,” said Michael Dinwiddie, Spring Hill’s mayor.