Morgan Nguyen

Instructor Jennifer Bailly

ECON 301
Article 4

The article “A Two-Tier Wage System Roiled The Auto Industry. Workers Today Say No Way”

was published on October 16, 2021, by the NPR is available at:

https://www.npr.org/2021/10/16/1046164945/a-two-tier-wage-system-roiled-the-auto-industry-

workers-today-say-no-way

A two-tier wage system refers to an employee salary plan in which new workers get

lower wages and benefit groups under the current levels at the same job. In the article, the

payroll schemes exist in some U.S industrial plants because they get more profits from reducing

labor costs and gaining a competitive edge while production remains consistent. However, when

the labor market has many changes in which workers are in high demand, the system becomes a

hindrance. In reality, it causes employee discontent with unions, hurts future employees, and

destroys the companies livelihoods.

Following the article, many companies such as Kaiser and Detroit automakers use the

two-tier wage system to gain back competitiveness, but it causes moral issues and inequality

between newer and current workers. In their opinions, the system is a crucial step forward for

increasing profits because of managing labor costs effectively. It can fit in the situation of the

low demand and high supply in the labor market but does not fit the current job market. The

article cites the recognition of these companies that “it created an unhealthy environment of two

classes of workers doing the same job.” We know that automakers and healthcare providers work

in hazardous environments, especially during the pandemic. They can get a compensating

differential as an extra payment for the differential risk of death or injury on the job. After
adjusting the risk, their income amount is no greater than others working for less hazardous

employment. Therefore, diving into two different wages between newer workers and current

levels is unfair to new workers when they have to work in the same dangerous and toxic

circumstances as current levels.

In addition, the two-tier wage system causes an income inequality that leads to an

increased unemployment rate and an output products reduction because of misleading rewards

for current low-productivity workers and preventing quality jobs from new high-productivity

workers. Even after signing a long-term contract, these new workers still may not receive an

equal income as their current colleagues at the same job unless they get promoted because the

increased salary and benefits are accumulated based on the current amount. Many companies

would choose to hire only experienced workers whose abilities justify the higher wage.

However, they are likely less generous with fringe benefits and hold down labor costs by

adopting the two-tier wage system. The inequality inherent causes employee discontent that will

lead to unstable employee performance and inefficient productivity at work. The workers will

not stick with jobs that require too much effort but pay less money because they cannot live on

the meager wages or unfair practices. Consequently, employers harder to hire and retain good

workers as well as destroy the future path of the company.

After the pandemic, the economic markets are more sensitive and have trouble because of

shortage, inflation, and higher costs of goods. Also, we are fighting for a higher minimum wage

that helps all workers should be paid and afford to live on it. With this system, our efforts in this

war become more and more difficult.