A Double-Edged Sword? The United Autoworkers Contract

During the fall of 2007, the United Autoworkers’ (UAW) contract negotiations with the “Big 3,” General Motors, Chrysler and Ford, were big news, including strikes at both GM and Chrysler. The resulting contracts were the epitome of the attacks on the broader labor movement, and included concessions of both a VEBA (Voluntary Employees’ Beneficiary Associations) to fund the health care benefits and a two-tier wage system that allows for non-core (non-assembly) jobs and, in the case of Ford, a percentage of all new hires, to be filled by workers making less than half the pay and benefits of current workers.

It seems that the days of middle class autoworkers are dwindling, replaced with Wal-Mart income standards and benefits. Gone are the days of fair contracts; Big Business has convinced workers they’re lucky to still have jobs. Since concessions like two-tier contracts disproportionately affect young workers, they are the ones who have the most at stake.

A basic principle of unionism is “equal pay for equal work,” meaning that people doing the same or comparable job should receive the same hourly or salaried pay. A two-tier wage structure destroys that concept, and unfortunately is making a comeback. Two-tier contracts first starting emerging during the late 1970s and by 1983 were not uncommon, particularly in the recently deregulated airline industry of the time. By the early 1990s many contracts had dropped or eased out of two-tiers due to the pressure of labor’s fight against them, morale problems and a recession that had squeezed new hiring.

Two-tier contracts usually have a wage scale for newly hired workers that is lower than that for other workers, with little or no opportunity to ever reach the same salary of longer-term workers. Benefits can also be part of it, with less paid time off, higher insurance premiums, or no benefits at all. Sometimes the corporations get around non-tier contract clauses by using workers who aren’t even permanent employees, but temporary or contract employees, brought in when business picks up and then laid off when it slows down.

All of this is done to save the company money and sow seeds of discontent towards the unions. It creates a situation where two employees are working side-by-side; one may be making $28/hour with great health insurance, the other, $14/hour and can’t afford to pay the increased premiums. It pits worker against worker, generation against generation. It’s the discrimination that women and minority workers have faced for centuries, and yet is perfectly legal.


For the new contracts at GM and Chrysler, a distinction was made between core and non-core jobs, or those that are directly related to building an automobile and those that aren’t. New workers hired for the non-core jobs fall into the lower tier of wages and benefits. What follows is a basic breakdown of each contract, along with buyouts and job cuts that have been announced since the contracts were ratified.

At GM, for newly hired non-core jobs a worker will get $25.65 in combined wages and benefits, as opposed to current workers who receive $78.31 on average. This new classification applies to 16,000 workers at GM. And GM recently announced that they are offering buyouts (incentives for current workers to retire or leave) to all 74,000 current hourly workers in an effort to reduce costs, with as many as 56,000 workers who could retire by 2011.

Chrysler also agreed to a second tier for all non-core jobs with similar wages and benefits to GM. In addition, 21,000 factory jobs are being eliminated as part of last year’s restructuring plan resulting from the private equity firm Cerberus’ purchase of Chrysler.

At Ford there is no difference between core and non-core jobs; 20% of all new workers hired will fall into the lower tier. Ford also announced that they are looking for 8,000-10,000 more current workers to accept buyouts, and made that offer to all 54,000 current hourly workers.

In addition, all three contracts included clauses allowing for layoffs based on market fluctuations.

For young workers this means that it’s going to be harder for us to find jobs with salaries big enough to pay our student loans, buy a house, raise a family, or pay the ever-increasing cost to fill up the gas tank. It means that young people may be working next to someone making more than twice as much as them, can’t count on a pension or even paid sick time. This is not limited to the manufacturing sector by any means, quite the opposite. It has long been known that the basic structure of the auto contracts are copied by other groups, including teachers, state workers, police and firefighters; along with others, such as the airline and steel industries.

Two-tier means division on the shop floors, a longer climb to a better wage, higher turnover and lower morale. It can also cause a “brain drain” in some areas by driving new graduates to states with higher wages and unionization.

For many it may seem easiest to blame the unions for allowing such a devastating contract; that they should have fought harder. That’s exactly what the corporate executives are hoping for at the start of negotiations, when they ask for the workers’ souls on a platter. The conservative political agenda over the last 30 years has continued to deregulate industries, allowed work to leave the U.S., destined for sweatshops, and fostered an ideology that everyone has a stake in the business of business. In the meantime CEO pay is now 364 times more than an average worker’s pay, and, unbelievably, private equity and hedge fund managers’ pay is more than 16,000 times what the average full-time worker makes (www.CNNMoney.com, 8/29/2007).

However, there are signs of working people united against two-tier contracts and successfully fighting them over the past few years.

In July 2007, a contract was approved for over 65,000 grocery store workers in California that tossed out a controversial two-tier pay scale. The new agreement reverses a contract established after a 141-day strike and lockout four years earlier that put about 33,000 of the workers into a lower-tier pay and benefit scale. After turnover rates almost doubled and morale bottomed out, the grocery chains were forced by union and community pressure to remove the two-tier provision in the new contract.

Just before Christmas, 2005, the city of New York was paralyzed by a three-day strike by transit workers in response to a demand by the Metropolitan Transit Authority for a two-tier benefit system. Local 100 President Roger Toussaint declared that the union would adamantly oppose any two-tier system, saying it would create “two hostile camps within the union.” The strike forced major concessions from the MTA, including the removal of the two-tier pension clause, and the addition of a number of new benefits, including a pension refund, maternity leave, and better health care upon retirement.

Could the two-tiering of UAW workers been prevented? That is a question for the UAW leadership. But it definitely has a better chance of being prevented in other fights if young workers participate more actively in struggles to form, join and strengthen unions.

With the huge numbers of older workers accepting buy-outs and leaving the auto industry, and increasing numbers of baby boomers retiring from all industries, young workers will be filling the ranks. Young workers must keep unions strong, to continue the fight that working people have waged for more than a century. This is an opportunity for youth to step up to the challenge to help rebuild the labor movement.