A darker future for "Tier 2" workers

Original Reporting | By Eric Kroh |

In that situation, families will try to earn extra money any way they can, either by working longer hours or by taking on additional jobs, Shierholz said. But in the current job climate finding additional work is difficult, she said. “The odds are stacked against families being able to make this up in an economic environment like this.”

“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.” — Heidi Shierholz, labor market economist, on the practical impact of making Tier 2 wages

Dorothy Barrick, group manager and financial counselor at GreenPath Debt Solutions in Farmington Hills, Michigan, agreed that a worker in the area with an annual income of $30,000 would have to cut back on non-essential expenses. She said it would mean doing away with cable television and using an antenna instead; going to the library to use the Internet; shopping at Salvation Army and Goodwill for second-hand clothes; and driving a car with a bad muffler or worn-out tires.


What kind of house…and where?

The Orion plant is located in Orion Township. According to the Census Bureau, the median price of an owner-occupied home there is just over $232,000, based on 2005 to 2009 data. Jerry Wuebben, a realtor with Century 21 Sakmar & Associates in Rochester, Michigan, noted that house prices have declined since the financial crisis began in 2008, but that there is a great difference between the kind of houses that Tier 1 workers are able to afford as compared with those affordable to Tier 2 workers.

Jay Dubrinsky, a mortgage banker at Hall Financial in Bloomfield Hills, Michigan, said the most expensive house a Tier 2 worker could afford would probably be around $85,000. But he or she likely could not afford the 20 percent down payment for a conventional mortgage — $17,000 in the case of an $85,000 house. Some workers might qualify for a mortgage insured by the Federal Housing Administration (which requires a down payment of only 3.5 percent), but blemishes on one’s credit history — a not-uncommon by-product of a period of financial stress — might make lenders decide that one was not creditworthy.

Will pay for tier 2 workers lag forever?

Tier 2 workers earn about $15 per hour after one year of employment, according to a GM spokesman. After two years, they earn about $16 per hour.

At that point, they have hit the pay ceiling — they have progressed to the top rate available.

GM has no plans to hire any workers at Tier 1 wages, the spokesman said. The only way for a Tier 2 worker to move up to the higher tier is to replace a Tier 1 worker, he said.

At the moment, that upward mobility remains only a theoretical possibility. While under existing labor agreements, the percentage of Tier 2 workers is ultimately supposed to be capped at between 20 and 25 percent after 2015, GM is permitted to hire an unlimited numbers of Tier 2 workers until then.

And, there is no cap on the percentage of Tier 2 workers that can be employed at individual plants. Finally, Tier 1 workers cannot transfer to the Orion plant unless they previously worked at the plant and retained recall rights.

Nick Waun said the agreement sets the stage for GM to eventually transition all jobs at the plant to Tier 2 wages. He feared the plant would become a model for producing cars with low labors costs and the pay structure would be replicated at other plants. Remapping Debate asked GM representatives whether it was the company’s goal to move the entire Orion plant to Tier 2 wages, but did not receive an answer.

Even coming up with approximately $3,000 (the down payment on a FHA-backed loan for an $85,000 house), Shierholz said, could be a struggle. “Imagine the scenario where you have the single parent who has that income and has to pay for childcare, transportation, their existing housing costs, food,” she said. “They’re just going to be paycheck to paycheck.”

On the other hand, a Tier 1 worker can afford a very different home, probably one selling for $175,000, according to Dubrinsky. Wuebben said that even a $200,000 house on lakefront property would be within reach of an employee making the higher wage. “They would be getting some pretty nice housing,” Wuebben said.

A search of listings on area real estate websites turned up a bungalow listed at $86,000 with three bedrooms and one bathroom situated on a lot with a small yard in the village of Lake Orion. A separate listing featured a home priced at $189,900 that was located on Lake Orion and had three bedrooms, two bathrooms, a large porch, and a pier extending into the lake (see photos on last page).

Barrick said a Tier 2 worker might choose instead to try to stretch his income by settling in a less expensive area, such as the city of Pontiac, Michigan, about a 15-minute drive south from the Orion plant.

Barrick characterized much of Pontiac as “concrete, and small patches of grass in backyards,” as opposed to Lake Orion’s lakes, public parks, and beaches. A starter house in Pontiac would likely be a two-bedroom on a small lot, she said. “In the city you’ve got your small, typically fenced-in yard and that’s it,” Barrick said. There are also fewer restaurants and businesses in Pontiac compared with Lake Orion, she said, and the public school system in Lake Orion has a better reputation.

According to data from the Michigan Department of Education, the Lake Orion community school district outperformed all but one of the surrounding school districts in math and reading proficiency based on the spring 2011 Michigan Merit Exam, a state assessment test for high school juniors. In Lake Orion, 72 percent of students met or exceeded expectations in math and 77 percent met or exceeded reading expectations. In the Waterford school district, the ratios were 40 percent for math and 60 percent for reading, while in the Pontiac City School District they were 6 percent for math and 18 for reading.

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