I’ve been catching up on my reading this afternoon, things that I meant to get to a while ago. One is this interesting Nation story “How Two-Tiered Union Contracts Became Labor’s Undoing.”

Two-tiered contracts are when groups of workers doing the same job at the same company are paid and given benefits and raises along different scales based on their seniority. That is, it is not just that the older guys get paid more because they’ve been there longer, but the younger workers may never get paid at that higher level even if they last as long as the older guys: the newer workers are locked into a lower rate and a slower rise.

This is essentially what happened in the auto industry bailouts in 2009. While the United Auto Workers agreed to concessions from members as part of the government’s deal, those concessions applied mainly to new  company hires. The existing workers retained their old wages and benefits. The union was protecting its existing members at the expense of its prospective new members.

Nation writer Josh Eidelson explains the corrosive effect this is having on unions:

[Karl Hoeltge] earns $15.78 an hour on the assembly line of a General Motors factory near St. Louis, under a union contract that will cap his pay at $19.28 an hour five to six years from now. That is, if he hasn’t left by then to pursue his dream, which is to commercialize one or two of the children’s toys he designs in his off hours. Karl’s father, Gary, has worked for years on the same assembly line, and the son says he might be more reconciled to a career at the plant if he could work up to the $28 an hour his father earns. But, he says, “I’ll never catch up to my father’s pay—not if the union allows the present setup to continue.”


And so it is that Karl is earning the same hourly pay—not adjusted for inflation—that his father earned when he started at the plant in 1968. And that is where Karl’s pay will remain if the two-tier system prevails and spreads. Some 20 percent of all union contracts currently specify two-tier arrangements, up from very few a generation ago, according to Glenn Perusek, director of the Center for Strategic Research at the AFL-CIO. More often than not, the tiers apply to pensions and health insurance as well as wages. Most of these concessionary agreements have been negotiated since the 1990s, with little public resistance from the labor movement (although suppressed anger at the forced retreat almost certainly contributed to the Occupy Wall Street movement). … [Emphasis added]


Two-tier agreements are largely a below-the-radar phenomenon. Management and labor don’t call attention to them—from a public relations point of view, they’re a feather in the cap for neither—and I first ran across them almost by chance, during a reporting trip to Milwaukee in the fall of 2010. The city’s unemployment rate had peaked in January of that year at 9.6 percent, in the aftermath of the Great Recession, and had declined only gradually, to 7.3 percent, by December 2012. Elsewhere, the auto crisis had already brought a two-tier system to GM, Ford and Chrysler with the consent of the UAW, which had responded in 2007 to corporate pleas for relief from diminishing profits.

I remember blogger Mickey Kaus making a similar argument a while ago that these contracts will be Big Labor’s undoing though I cannot find the link.