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Scott Olson

The country’s largest automakers — Ford Motor Co., General Motors and Stellantis — are poised to become the latest U.S. corporations to do away with tiered wage arrangements, a system that splits the workforce into haves and have-nots by confining newer employees to lower wages.

All three auto giants have agreed to sweeping improvements in employee pay, including the elimination of unequal pay scales that made it difficult for new hires to catch up with longtime employees. While the deal still needs to be approved by union workers, it’s a big win for employees and indicative of a recent trend sweeping workplaces.

UAW, GM sign tentative deal that will end strike if workers ratify it

Since 2021, at least a dozen U.S. employers — in industries as varied as aerospace, education and manufacturing — have abolished tiered wages and benefits, according to an analysis by The Washington Post. Robust post-pandemic spending combined with widespread labor shortages have given workers a rare window to fight against <a href="https://www.richmondfed.org/-/media/RichmondFedOrg/publications/research/econ_focus/2019/q2-3/feature2.pdf" target=_blank>decades of eroding pay gains</a> and benefits.

“Tiered arrangements have haunted the labor movement since the 1970s, but we are finally reaching a tipping point,” said Joseph McCartin, a professor of labor history at Georgetown University. “Unions are pushing hard to rectify this problem. It gets to the heart of one of the longest-running issues in the history of American labor: equal pay for equal work.”

For autoworkers, eliminating tiers reigned as a top demand by the United Auto Workers, often displayed prominently on T-shirts and picket signs, during their six-week strike against automakers. At Ford, for example, temporary workers who currently start at $16.67 an hour, will soon be reclassified as permanent, allowing them to make at least $24.91 an hour. By the end of the contract they will earn the top hourly wage of $40.82.

The new deal also shortens the amount of time it takes for new employees to work their way up to the top pay rate, from eight years to three.

Ford and General Motors did not respond to emails seeking comment. A spokeswoman for Stellantis declined to comment.

Two striking UAW workers at the same Ford plant, very different lives

“In 2007, employers went all-in on a divide-and-conquer strategy for the American autoworker,” Chuck Browning, UAW vice president and chief negotiator with Ford, said in a news conference Sunday. “They introduced the two-tiered system, where some get a pension and post-retirement health care, and some don’t. We fought like hell to undo that damage of the past 15 years of this contract.”

The gains build on growing momentum. Earlier this year, UPS narrowly averted a strike by agreeing to equalize pay for its drivers. Lower-tier drivers were reclassified as regular drivers, lifting their starting hourly pay from $20.50 to $23.

The water treatment company Culligan, Boeing, Harley-Davidson and Caterpillar have also recently done away with tiered wage structures at the urging of workers’ unions.

There has also been a broader pushback against unequal wages, even when unions aren’t involved. In Nevada, residents last year voted to abolish the state’s two-tier minimum wage that allowed employers that offered health benefits to pay $1 less per hour. Beginning July 2024, all employers will have to pay at least $12 an hour.

“The pessimistic view has always been that once you have tiers, there’s no going back — you’ve conceded that these jobs will no longer be good jobs,” said Rebecca Givan, a professor of labor studies and employment relations at Rutgers University. “But now workers are proving they can actually roll this back, which is very significant.”

Why a looming UAW strike is focused on temp workers, tiered employment

Multipronged wages began in the 1970s and 1980s, when back-to-back recessions, high inflation and rising competition from abroad pinched companies’ profits and threatened their survival, said Robert Bruno, a labor professor at the University of Illinois. The practice quickly spread among airlines, supermarket chains and manufacturers around the country.

And although such arrangements are common in many types of jobs — public-sector positions, for example, often offer different pay and benefits by start date — they tend to be most visible in union jobs, where workers and employers regularly negotiate for blanket contracts with transparent pay scales.

“These two-tiered systems grew out of a very bad economic moment,” Bruno said. “Manufacturing in America was significantly hollowing out and, for the first time in American history, unions weren’t incrementally improving working conditions. They were giving back things they had won.”

Those concessions continued into the 1990s and early 2000s. For employers, tiered pay was a simple way to reduce long-term labor costs. But for workers and unions — who referred to the practice as “eating your young” — it became a growing source of resentment. Newer hires felt undervalued and demoralized, and long-term workers worried they could easily be replaced by cheaper newcomers.

“All of a sudden, you have workers who are side by side, doing the exact same job but receiving wildly different wages,” Givan, of Rutgers, said. “Not only are newer workers getting paid less, but their pay is capped in such a way that no matter how many years they work, they’ll never catch up.”

Unequal pay scales had a resurgence during the Great Recession, when businesses and workers were willing to take desperate measures to save jobs. By the time the U.S. government engineered a $17.4 billion bailout of General Motors and Chrysler in late 2008, the companies were on the verge of bankruptcy and faced 1 million job losses. The federal lifeline came with several stipulations, such as quickly reducing their debt and negotiating lower pay and benefits with the UAW. The eventual solution: a two-tiered system where workers hired before 2007 were paid more than the people who joined after them. (Earlier this year, that translated to roughly $33 an hour in pay for pre-2007 hires, and about $17 an hour for workers hired after 2007.)

Sixteen years in, the companies’ financial picture has changed dramatically. Instead of billions in annual losses, the Big Three automakers have been boasting hefty gains. The carmakers have posted roughly $250 billion in profits during the past decade — including $21 billion in the first half of this year, before workers went on strike, according to <a href="https://www.epi.org/blog/uaw-automakers-negotiations/" target=_blank>the Economic Policy Institute</a>. Chief executive pay has increased 40 percent in the past four years, compared with a 6 percent bump in workers’ pay, according to union officials.

“The increase in tiers happened when companies were struggling and it was fairly credible for them to make threats like layoffs, factory closures and bankruptcy,” Givan said. “But there’s no way these employers in 2023 can credibly say they’re at risk of going under.”

Autoworkers used to be the best-paid workers in the U.S. What happened?

The U.S. economy has defied expectations this year. Americans are still spending, despite inflation and fast-rising interest rates, which means businesses are still hiring. Employers have added more than 560,000 jobs in August and September alone, and there are still millions more openings than there are people looking for work — a dynamic that is especially pronounced in industries that are physically intensive or require specific skills.

That has given workers new leverage to demand better pay and more favorable working conditions. After nearly two decades of tiered wages, the University of Pennsylvania is equalizing pay rates for housekeepers and janitors at the urging of a workers union. All housekeepers at the university will soon be able to make up to $28.68 per hour, per a new five-year contract negotiated last summer. Previously, legacy workers could earn $24.15 an hour, while those hired after 2004 were capped at $18.44.

“Getting rid of tiered pay was a top priority for employees, and there was no way we were going to budge away from it this time around,” said Shane Reilly, secretary and treasurer at Teamsters Local 115, which advocated for the university’s workers. “Workers are not going to accept these pay differences anymore.”

A spokesman for the University of Pennsylvania did not respond to emails seeking comment.

The question now, labor economists say, is how long workers will continue to have the upper hand. The economy, though surprisingly resilient, is facing a number of pressures, including rising interesting rates, an imminent government shutdown, slowing consumer spending and the resumption of student loan payments. Many economists are predicting a shallow recession next year, which could come with widespread job losses and erode some of workers’ recent gains.

“The history of the labor movement has been one not of gradual upward climb but of quantum leaps that happen at particular junctures,” McCartin said. “We don’t know how long it’ll last, but it feels like we’re living through a transformational moment.”

Lauren Kaori Gurley and Jeanne Whalen contributed to this report.

Gerald Loeb Award, Beat Reporting, 2021

Northwestern University, Medill School of Journalism

Abha Bhattarai is the economics correspondent for The Washington Post. She previously covered retail for the publication.

Abha Bhattarai

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Big Three automakers set to scrap two-tier pay at unions’ behest

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UAW Strike Continues, As Autoworkers Picket Outside Chicago's Ford Assembly Plant

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‘A tipping point’ in equal pay: Automakers are scrapping tiered wages

Ford, General Motors and Stellantis are on their way to eliminating wage scales, joining more than a dozen companies that have taken similar steps since 2021.