Nearly 40,000 Fiat Chrysler Automobiles workers could walk off the job if their employer and the United Auto Workers fail to agree on a new contract by midnight on Thursday.
The union presented its rank-and-file members with a deal in mid-September, but the workers rejected it—the first time UAW members had dismissed a national agreement in 33 years. Their sticking point? A two-tiered pay structure.
The deal the UAW initially brokered with Fiat Chrysler was by no means skimpy on compensation. Workers hired before 2007 would get a raise for the first time in 10 years, to nearly $30 per hour, and it would have given entry-level workers wage increases to a range of $17 to $25.23 per hour.
If you think that sounds like a pretty good deal, consider this: According to the Bureau of Labor Statistics, the average American who works in vehicles and automotive parts made less in September 2015 than he did ten years ago.
Why are autoworkers earning less than they did a decade ago? Part of this has to do with the Big 3’s (Ford, GM, and Fiat Chrysler) two-tier wage model, says Joel Cutcher-Gershenfeld, a professor of labor and employment relations at University of Illinois, Champaign-Urbana. There are a few other reasons as well. For starters, foreign automakers that have opened manufacturing plants, mainly in the southern United States, have hired non-union workers, meaning they can pay laborers lower wages. Second, during tough economic times, the Detroit automakers struck deals to give their workers lump sum payments instead of annual percentage wage increases. “Those bonuses don’t show up in hourly wages,” Cutcher-Gershenfeld says. And third, in 2007, as the Detroit automakers started to bleed cash, they struck a deal with the UAW to introduce a two-tiered wage system, which gave workers hired after 2007 as much as 45% less pay than employees who were hired earlier.
FCA workers want this two-tiered model eliminated in the ongoing UAW negotiations.
That’s a tall order, considering automakers argue that the tiered system helped save them from demise during the recession because they could more freely hire workers at lower wages, all while narrowing the gap between pay at unionized manufacturing plants and the non-union shops run by foreign carmakers in the South.
While the deal that the FCA employees rejected would have shrunk the pay gap between long-term workers and their entry-level counterparts, it did not achieve what they’re really after: a full path for entry-level workers to transition to the higher tier—where average pay is $28 per hour—and a cap on the share of FCA workers who are relegated to the entry-level.
Right now, 45% of FCA employees are in the lower tier. Workers say that the division has created a class system where people do the same work but receive vastly different wages.
