1. To what extent is the renewed job growth in
the automobile industry in the United States due to the use of two-tier wages?
The
renewed job growth in the automobile industry in the United States after the
recession and introduction of two-tier wages and after the contract between GM
and the United Auto workers (UAW) has significantly addressed the in equal pay
in two tier pay structure. This system has shown a new route of payment to the
industries. Though the two-tier wages has shown high difference between the
veterans' employee and the new employees pay, it has significantly reduced the
labor cost in production of the vehicles which has in turn saved a significant
revenue to the company. Also this system turned out to be providing employment
for more numbers of labors.
Taking
particular case of General Motors, after the introduction of the two-tier wages
plus outsourcing it is assumed to reduce from $1160 to $710 per vehicle i.e.
$450 per vehicle. Annually, GM is saving $72 million which is perfect example
of how two-tier wages has divided the job opportunity to more number though the
Tier II has lesser pay but could accommodate more number of labors then Tier I
which is highly paid.
2.
To the degree
job growth (and increased car sales that come from more competitive labor
costs) is based on two tier-wage structures, how sustainable is this approach?
Consider, for example, that Fiat and Chrysler CEO, Sergio Marchionne stated
that “Long term, (the system) is not a viable structure. It creates two classes
of workers within the plant. It doesn’t work in the same direction we are
working…to get this organization to work in unison.” Why would Mr. Marchionne
make this statement? What are the potential drawbacks of a two-tier structure?
When would we expect any such drawbacks to materialize?
Two-tier
is introduced as short term solution after the recession that hit the most of
the industries of United States to lower the labor cost to be competitive in
the market. This might seem sustainable in the short run but it will be a
failure in long term.
I
totally agree with Mr. Marchionne, though this system seem profitable to the
company but it is not viable in term of employee. This system will create gap
and misunderstanding between the
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