Are Two-Tier Wage Contracts Fair?

My experience as a Teamster, however brief, was educational.

One of the ways I paid for college, in my final years as an undergraduate, was to work for United Parcel, humping packages on the box line.  It was one of those jobs they posted at the University Job center, and I jumped at the chance to work for a whopping $8 an hour, which was double what I was making as a Pizza Delivery Driver - and a lot less wear and tear on my car.

I started out washing Package Cars - the UPS name for the brown delivery vans they used.  At the time, UPS designed their own vehicles, with its unique front-end design.  Most were powered (or underpowered) by six-cylinder Ford and Chevy engines, and when finally junked, after many, many years, they went to a unique UPS graveyard in Utah - I was told.  No one was allowed to buy used UPS vans, for obvious reasons.  With a uniform and a truck, you could drive around and pick up thousands of dollars of packages, just in one single day.

And many of the Package Cars were quite old - some in fact, older than me.  The oldest one was from 1959, if you can believe that.  And back then, UPS was very strict about keeping the package cars clean.  They were washed every day, in an automated car wash. But since the car wash froze up in the winter, they hired college students (about 20 of us) to hand-wash the vehicles indoors during the winter.  It was a pretty good job, but hard work.   Imagine washing 20 or so vehicles - in one night.

We were divided into teams of three, except for me and another guy, who worked in a team of two.   He and I would wash more package cars every night than any of the three-man teams.  And our secret, besides working hard, was that it was actually easier for two people than for three, as the third man just got in the way, most of the time.

So at winter's end, management asked the most productive washers if they wanted to work for UPS full-time, at $8 an hour.  My partner said "No" as he wanted to study for school.  I needed the money and took the job - every night from 10:00 PM to 4:00 AM, sorting boxes and loading them, in correct order into the package cars.

While I was ecstatic to be making the whopping sum of $8 an hour (double the minimum wage back then) the old-timers were quick to point out that this was half of what they made under the old Teamsters contract.  We had a two-tier wage contract.

Old timers made $16 and hour or more - which was a staggering amount of money back in 1985.  That would be like $33 an hour today or about $66,000 a year - well above the median income today.

Of course, one would wonder why the union would agree to such a draconian cut in pay - for new hires.  After all, wasn't it the union's job to get maximum pay for everyone?  At the time, the Teamsters were going through, well, troubles.  They would end up getting taken over by the government, and, in a strange twist of fate, a new leader - the son of the famous (or infamous) Jimmy Hoffa, elected as, of all things, a reformer.

To give you an example of how bad things were, one night, while working the box line, I took a break in the break room, getting a cup of coffee.  There, I saw a pamphlet that read, "Brother Teamster!  Help take back our union!"    I read, with some amusement, the pamphlet, which was basically a pitch to throw out the Mafia and bring back real union leadership.  I thought to myself, "Well, good luck with that!"

Just then, the shop steward came in, and said, "Where did you get that pamphlet?" and I replied, "It was just sitting here."

"Give it to me!" he cried, "Tell me who gave this to you!" and he proceeded to interrogate me and make vague threatening remarks about the "trouble" I would have, if I didn't cough up who the traitor was.  But since I had just found the pamphlet, I didn't have the goods he wanted.

"Well, OK, I'll let it slide THIS TIME," he said, "But if ANYONE ever hands you stuff like this, you come directly to ME, you UNDERSTAND?"

And I nodded in agreement and was thankful that in about two months, I would be graduating from College with my Electrical Engineering Degree and would be moving far away.

The union, at that point, needed members.  Organizations, as I have noted before, might start out with the best interests of the members at heart, but any of them - whether it is a Union or National Public Radio, the Human Rights Campaign, or the National Rifle Association - or whatever - all quickly move into self-preservation mode.  Once you are a six-figure (or seven-figure) salary head of such an organization, Rule #1 becomes self-preservation.

The kicker for the Union was that, if they signed a new two-tier contract with UPS, UPS would hire more people.  And each new hire would pay the same union dues as the old hires - even if their wages were half the norm.  So real income for the union goes UP,and the existing members vote for it, because their wages aren't affected.  Management can sell "two-tier" to both union leaders and existing members.

And for me, this was a problem, as the initiation fee and annual dues were in the hundreds of dollars, but my pay was far less than others.  And I was only working the job to pay for college.  According to the regs, after 90 days or so, I had to join the union and pay these fees - in installments.  So, I waited until the last minute to join, and then paid only a couple of installments before resigning my position.  The installments pretty much wiped out my weekly paycheck.  So there was little point in staying on.  By the time I paid the last installment, I would be graduating from College.

They must have liked me, as management asked me to stay on, promising me all sorts of good things would happen - down the road - if I became a member of the brown-shirted "family".  But I politely declined.

Today, we are seeing a similar thing happening with the UAW.  To recover from (or in the case of Ford, stave off) Bankruptcy, the UAW gave into the Big-3 with a new contract that called for a two-tier wage scale.  And the new head of Chrysler, of all people, wants to do away with it.

Today, a line worker can be making as little as $14 an hour - which is what they were making when I was working for GM back in 1978.  The Union has brought progress!  And $14 an hour is only about $30,000 a year - albeit with excellent benefits.  While thirty-grand a year is nothing to sneeze at, it is below the median income of about $50,000 that your typical "middle class" person makes.

The old timers might be making closer to $30 an hour, which, like my Teamsters experience, is nearly double what the new hires are making.

The question remains, is such an arrangement fair?  When I was working at UPS, it never really bothered me that much.  I had signed up for $8 an hour and was pleased to be making that much in an era where unemployment was high (about like today).  So, to me, the basic bargain was the one I made.  Comparing my situation to that of others would be a false comparison.  They got the deal they got because they made that deal in a different era.  And if the wages for new hires was $16 an hour, I likely would not have been working there at all.

But, on the other hand, we do tend to compare ourselves to the situation of others, as an indicia of our well-being.  And as I noted before, it is a bad habit and one we all should break - because there will always be someone making more money than us, and someone who is getting paid an astounding amount and doing very little - or so we think.

But perhaps the bottom line on the two-tier wage system is that it is not something that will induce people to stay - in the long run.  Thirty grand a year is good money, if you are unemployed.  But as you might imagine, a young welder at Fiat-Chrysler would be sorely tempted to move to some Montana Oil Boom town and pull in a hundred grand a year for a few years - even if it means living in an RV at Wal Mart.

UPS spent a lot of time and money training me - after going through a selection process - and had promised me great things.  When I told them I was resigning to pursue my Electrical Engineering career, they literally pleaded with me to stay.  They didn't want to lose a good employee.  But at $8 an hour, UPS was a good college job, but hardly career material for me.  And as a future, it did not look very lucrative.

And I think, moving forward, Chrysler and others will see the same thing.  Automobile assembly lines are no longer the labor-intensive hump-jobs that they used to be - where workers would scramble through car bodies passing down the assembly line, desperately trying to air-gun in some bolts or screws before the next car showed up.  Back in the 1960's, this was a physical labor job.  Today, it is still physical labor - but a lot more of the work is technical in nature - caring for the automated equipment needed to keep the line running.

And a guy who can repair your painting robot is worth a heck of a lot more than $16 an hour.  And, unfortunately, with Union rules, management's hands are tied as to how much they can pay.  And that is one problem with a Union environment - talent tends to leave.  Why stick around to be paid as much as a slacker, when you can make more on the outside?

So this is one reason Fiat wants to do away with the two-tier contract.  As noted in the article cited above, no doubt the other reason would be to get rid of restrictive union rules.  It takes few people to assemble a car these days, and yet, the old UAW contracts forced the big-3 to keep people on the payroll, even if they didn't work or were not needed.  The automakers would no doubt gladly exchange pay increases for more worker flexibility and less restrictive union rules.

But getting back to the initial question of this posting - are two-tier wage contracts fair?  Well, if you go to work for a company and agree to work for Dollar X, then you have struck a bargain that you think is fair.  Whether someone else is making Dollar Y should not play into it, should it?  Because comparing your situation to that of others does little for yourself except make yourself miserable.

And you always have the option of leaving and going somewhere else that pays more.  And if no one is paying more, then Dollar X is a pretty good deal.  And if others are paying more, your employer will no doubt increase wages to keep you from leaving.

Employment follows the law of supply and demand, like everything else.  And while we have a big supply of unskilled and unemployed labor right now, there is little demand for it.  But even today, if you have a skill in high demand, you can pretty much write your own offer.  Unfortunately, today, few people seem interested in acquiring skills that are in demand.  And I guess we are supposed to feel sorry for them, for some reason that eludes me.