A darker future for "Tier 2" workers

Original Reporting | ByEric Kroh | Labor, Unions

July 27, 2011 — At the beginning of most weeks, Nick Waun makes the five-hour drive from his three-bedroom house in suburban Lapeer, Michigan, about an hour north of Detroit, to a small apartment in Lordstown, Ohio, where he works as an assembler in a factory owned by General Motors Co. Some weeks he works on Saturday so it doesn’t make sense to make the trip back to Lapeer for the weekend.

Here’s what prompted the story

Two weeks ago, The New York Times ran an enthusiastic story on how GM was standing automaking "on its head"  with a "radically revamped factory" for building a sub-compact car.  The effort, it was said, is one "expected to be a breakthrough in establishing a new level of cooperation between Detroit and the United Automobile Workers." The Orion, Michigan factory that is the site of the experiment "could become a model."

The secret? Paying many union workers about half the usual wage. According to the article, "lower employment costs were critical to the decision to build the [new car] in Michigan."

Entirely absent from the story was any examination of what it would mean for those auto workers who would be paid so much less than their counterparts. How much and how good of a middle-class life could they expect to enjoy? We decided to try to find out.

Editor

Waun, 32, used to work at GM’s Orion assembly plant, located in Lake Orion, Michigan, about half an hour from his home in Lapeer. But then the Orion plant shut down in November 2009 to be reconfigured to produce the Chevrolet Sonic and Buick Verano compact cars. During that time, GM was required by the union contract to supplement Waun’s state unemployment benefits so that he received 80 percent of his normal wage.

In October 2010, Waun said, plant employees learned that according to the terms of a deal that their union, United Auto Workers (UAW), struck with GM to ensure that the Orion plant would resume production with the new models, 40 percent of union workers at the plant would be so-called “Tier 2” workers. These workers would earn a starting wage of around $14 per hour and progress to $16 an hour rather than earning the standard wage for all Tier 1 workers of $28 per hour. The 40 percent quota would be filled with new hires or by bumping down Tier 1 workers making the higher wage. Waun said that, as one of the last workers hired at the Tier 1 wage, he feared he would be forced to accept the lower wage if he wanted to go back to work at the Orion plant, so he accepted an offer to relocate to the Lordstown factory.

It’s kind of a blessing to be able to make this wage,” Waun said. “That’s why I was willing to move out of state to try to keep it.” Waun is working on a campaign to persuade union leaders to fight to eliminate the two-tier wage structure during this year’s contract negotiations. The two-tier system was put in place back in 2007, approved by members, Waun said, on the premise that it was a temporary measure. Union members did not vote on the 40 percent level at the Orion plant.

One Tier 2 employee who works with Waun on the assembly line in Lordstown complained to him about the hassle of simply buying a new pair of eyeglasses. Because she did not have vision insurance, she had to pay out of pocket for the glasses and had to resort to a payday lender to come up with the money. Waun said Tier 2 workers are frequently “in a hole not being able to afford doing things that the top tier do. They dig themselves deeper into the pit in that way.”

 

Not a wage to keep a family out of poverty?

In Orion Township, where the Orion plant is located, median household income is around $80,000 according to the latest data from the U.S. Census Bureau. Based on a normal, 40-hour work week, a Tier 1 worker at the top $28 per hour wage makes $58,240 per year, about three-quarters of that median. In contrast, the top Tier 2 wage of $16 an hour yields only $33,280 per year, less than 40 percent of the median wage.

The Census Bureau in 2010 placed the poverty threshold for two parents living with two children at an annual income of $22,113. But Heidi Shierholz, a labor market economist at the Economic Policy Institute in Washington, said twice the poverty level is a more reasonable budget to meet what she called “bare-bones, month-to-month” expenses such as food, housing, transportation and childcare. By that reckoning, the Tier 2 wage at the Orion plant would not meet the needs of parents with two children (twice the poverty level for such a family is $44,226).

The difference between the two wage levels represents a huge hit in living standards, Shierholz said. For a family to be able to afford only the minimum expenses “adds huge economic insecurity,” Shierholz said. It could mean “you don’t have a cushion if you need to repair your car. Any kind of savings…putting away for retirement, putting away for kids’ education, putting away for any sort of getaway for vacation, forget about it.”

Man, that culture is just gone”

Stacey Kemp, 53, is a former GM employee who retired after working for the company for 30 years (six of them at  Delphi Corp., the parts supplier spun off from GM). Kemp lives in New Lothrop, Michigan, about an hour-and-a-half outside of Detroit with her husband, a 24-year GM employee who works at a plant in nearby Flint.

Kemp said the best example of the kind of life that working at GM for full union wages has been able to provide her and her family has to do with cars.

If my car breaks down I can afford to get it fixed without too much trouble and without having to eat peanut-butter-and-jelly sandwiches for the rest of the week,” Kemp said. “If somebody on the second tier’s car breaks down, that’s a financial catastrophe.

To me that is the difference between middle class and working class,” she continued. “Middle-class people can afford to get their car fixed without major financial sacrifices in other areas.”

Kemp said she started out at GM at an hourly wage of $6.07 in 1977 and by the time she retired in 2007 she was making $27 an hour, the full union wage at the time. GM footed the bill for her health insurance while she was working. Kemp earns about $2,700 a month on her GM pension, she said, and about $70 to $100 of that is deducted to pay her health insurance premiums. Her husband, a Tier 1 employee, makes the full wage of $28.

Kemp and her husband raised three children on their two salaries. She said they always had a roof over their heads, they had a pool in the backyard, she could take her kids to the dentist if she needed to, and the family was able to go away on vacations every once in a while. She remembers taking her children to amusement parks and on several camping trips.

Kemp’s two daughters were able to go to college with what she says was significant financial assistance from her and her husband, and GM even pitched in $1,200 per year for their tuition, although she said the company no longer provides that benefit.

Kemp said she still subsidizes her children’s expenses in many ways even though they have all moved out of the house. “We help our kids quite a bit,” she said. None of them can find a full-time job, and she fears for their financial safety, though she said she is more concerned about her grandchildren. “Who’s going to help them?” she asked.

On a recent trip to the Detroit Institute of Arts, Kemp said she welled up in front of a mural by Diego Rivera depicting an assembly line. “Man, that culture is just gone,” she said. “My children will never experience that kind of security and that kind of opportunity.”

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