This stinks. Dual wages.

**Debbiedo** · September-30-10, 12:15 PM

Obviously Derick is overpaid....

**Meddle** · September-30-10, 12:15 PM

Why would anyone expect a new hire to make the same, or nearly the same as someone with 10 years experience?

**EastsideAl** · September-30-10, 12:21 PM

Again, what a 2 tier contract means, and what the story really doesn't make fully clear, is that under the contract those hired in on the new lower tier will never reach the level of wages and benefits that the older workers currently have.

**Meddle** · September-30-10, 12:42 PM

is that under the contract those hired in on the new lower tier will never reach the level of wages and benefits that the older workers currently have.

Which means the others are being paid too much. This is a big part of why so many jobs have been shipped offshore and why so many products are priced higher than people can afford.

**Wesley Mouch** · September-30-10, 01:02 PM

If the Unions were truly a 'brotherhood', a two-tier contract could never be signed. They would have only agreed to a single-tier contract somewhere in the middle. The company doesn't want two tiers. It only cares about total cost.

The union's acceptance of two-tiers demonstrates that they are not interested in fairness nor equality, but are an alternate 'country club' looking to protect their existing members over the best interests of their newer 'brothers'.

A future union will eventually evolve that cares about workers in Mexico, China, and will treat them as 'brothers'. Until then, we'll watch them marginalize themselves out of existence.

**Det_ard** · September-30-10, 01:33 PM

Originally Posted by Wesley Mouch

If the Unions were truly a 'brotherhood', a two-tier contract could never be signed. They would have only agreed to a single-tier contract somewhere in the middle. The company doesn't want two tiers. It only cares about total cost.

The union's acceptance of two-tiers demonstrates that they are not interested in fairness nor equality, but are an alternate 'country club' looking to protect their existing members over the best interests of their newer 'brothers'.

A future union will eventually evolve that cares about workers in Mexico, China, and will treat them as 'brothers'. Until then, we'll watch them marginalize themselves out of existence.

The union "brotherhood" has been BS for a long time. For years now I've watched union negotiations boil down to either all workers take a small pay cut or a small number of workers get laid off and the remainder don't have to cut their pay. Almost every time the high seniority workers choose to cut their low seniority "brothers" loose. Adios, brother, enjoy flipping burgers so I don't have to cut my pay from $33/hr to $32/hr.

**Det_ard** · September-30-10, 01:34 PM

Originally Posted by maxx

It's considerably below the median income for the U.S. which is around 50k.

No one should earn below the median, right Maxx?

**gazhekwe** · September-30-10, 02:26 PM

Another way to think about this, contracts are negotiated every, what is it, three years? In three years, different circumstances could result in more favorable, or less favorable, contract terms. Just because someone is hired in at a lower tier now does not mean that system will automatically continue until they retire or are permanently laid off.

**Mikeg** · September-30-10, 02:43 PM

It's an abomination and a serious black mark on American union leadership that they've allowed, and even encouraged, this to happen.

Even the unions are powerless to prevent the bursting of a "bubble". Over the last 20 years, the Detroit-based automakers allowed themselves to be caught in a vise that was squeezing them from opposite directions:

a) they bought labor peace by agreeing to national union contracts that

increased their labor and benefit costs faster than the rate of their internal productivity increases.
prevented them from shedding jobs as their market share declined

b) the new assembly plants that were built by the "transplants" added to the already existing domestic overcapacity.

In a situation of overcapacity within an industrial segment, it is an economic truth that over the long term, only the companies with the lowest structural costs will survive and the others will be forced to restructure or liquidate, thus solving the overcapacity problem. GM and Chrysler had the worst structural cost positions and thus eventually had no choice but to restructure and "burst the bubble".

**Cincinnati_Kid** · September-30-10, 03:27 PM

Originally Posted by gazhekwe

Another way to think about this, contracts are negotiated every, what is it, three years? In three years, different circumstances could result in more favorable, or less favorable, contract terms. Just because someone is hired in at a lower tier now does not mean that system will automatically continue until they retire or are permanently laid off.

In that case, the auto companies would have to sell cars like it's 1971 again. And that is very unlikely due to global competition. 2 tiers might get a slight bump in pay
after then, but the market will dictate everything. They won't ever see the $30.00 per hr, your Dad made, you can bank on that. But the CEO's will continue to bring home the bacon, whether the company is profitable or not.

**jiminnm** · September-30-10, 05:30 PM

[quote=EastsideAl;186779]But the point here is that, given the increasingly common 2-tiered contract, his wage will most likely ALWAYS be lower than what his brother makes.
[quote]

Not so. At some point in the future, all those currently in the higher pay tier will have retired, died or otherwise left the company. Then, the lower pay tier will be the only pay tier [[unless the problems that got the companies here resurface and they have to do it all over again).

**Hermod** · September-30-10, 05:57 PM

If you look at it from an impersonal, economic model, a labor union is an organization which seeks to increase labor "rental rates" by achieving a monopoly on the supply of labor to those seeking to "rent" that labor [[employers).

For a long while, there was no pressure on the US labor unions from competing labor pools. Wartime expansion and the explosion of consumer demand post war "soaked up" the returning soldiers while those coming of age post war were from the low birthrate years of the depression.

Three important factors began in the 1960s to erode the union monopoly on the supply of labor:

a. The demographic flood of new workers coming into the work force from the baby boom years.

b. The increased flow of immigrants both legal and illegal into the US as the tough 1920s immigration laws were revised in the name of "humanity".

c. The coming on line of competitive auto production capabilty first from Europe, then from Japan, and finally, Korea.

These three factors, more than any evil conspiracy, weakened the hold the unions had on the supply of labor and allowed the 'renters" of labor a tougher bargaining position in establishing "labor rents".

**Cincinnati_Kid** · September-30-10, 05:58 PM

Originally Posted by Meddle

Which means the others are being paid too much. This is a big part of why so many jobs have been shipped offshore and why so many products are priced higher than people can afford.

Well, , aren't the executives being paid to much? What's their excuse? They all should share the pain. It's no way they should get a flier when its more than likely it was their bad decisions that helped steer these companies to bankruptcy, not just the unions. The workers only do what their told to do. The executives kept building SUV's that got 10 mpg when gas went to $4.00 per gallon. Yet they get to ride off into the sunset with stock options and million dollar pensions. But, that's ok. Please.

**fryar** · September-30-10, 06:07 PM

They are. Maybe or maybe not all of the office workers, but there are examples of c-suite executives who are ridiculously overpaid. With the Big-3, and elsewhere. In my mind, this phenomenon is basically a market failure. Maybe a bubble of sorts. The causes escape me.

But the analyses of Hermod and Meddle nonetheless hold true. Basically, c-suite executives are often overpaid, and some of their salaries would be dividends accruing to shareholders [[or profits reinvested), all other things being equal.

**cman710** · September-30-10, 09:23 PM

Sometimes, there is way too much focus on how much the very highest people in a company earn. Typically, CEOs have 24 hour a day, 7 day a week jobs, and getting the best people to come to a company requires paying them similarly as those in other industries, which means they will make a lot.

Surely, some CEOs are overpaid, but many are being paid the right amount. For example, do you think Alan Mullally is paid too much at Ford? He has turned the company around, and has helped position it to be a market leader in the years ahead. He has more than earned his salary for the company.

**1KielsonDrive** · September-30-10, 09:39 PM

Originally Posted by Meddle

Why would anyone expect a new hire to make the same, or nearly the same as someone with 10 years experience?

Silly comment. That isn't even what we're talking about here and you know it.

**Cincinnati_Kid** · September-30-10, 11:46 PM

Originally Posted by cman710

Sometimes, there is way too much focus on how much the very highest people in a company earn. Typically, CEOs have 24 hour a day, 7 day a week jobs, and getting the best people to come to a company requires paying them similarly as those in other industries, which means they will make a lot.

Surely, some CEOs are overpaid, but many are being paid the right amount. For example, do you think Alan Mullally is paid too much at Ford? He has turned the company around, and has helped position it to be a market leader in the years ahead. He has more than earned his salary for the company.

Sure, Mullally is the exception, not the rule. He's done a good job to this point, but Ford isn't out the woods either. None of them are. Ford still has more debt because they didn't take the goverment loans. I was mainly speaking of GM and Chrysler. Wagoner f_cked up GM, and he gets a cushy retirement for his efforts. Henderson is a new CEO at Shell Oil Company. Boy, did he have a safe landing. It's B. S. but all we hear is a line worker shouldn't be making x amount of dollars.

**Hermod** · September-30-10, 11:50 PM

Originally Posted by Cincinnati_Kid

Sure, Mullally is the exception, not the rule. He's done a good job to this point, but Ford isn't out the woods either. None of them are. Ford still has more debt because they didn't take the goverment loans. I was mainly speaking of GM and Chrysler. Wagoner f_cked up GM, and he gets a cushy retirement for his efforts. It's B. S. but all we hear is a line worker shouldn't be making x amount of dollars.

The problem is that there are a lot more line workers in most companies than CEOs. What was it some years ago, something like $1,500 of the price of a car was health benefits for labor?

**Cincinnati_Kid** · September-30-10, 11:54 PM

Originally Posted by Hermod

The problem is that there are a lot more line workers in most companies than CEOs. What was it some years ago, something like $1,500 of the price of a car was health benefits for labor?

The salaries of executives should figure in that equation somehow, ya think?

**Mikeg** · October-01-10, 12:22 AM

The problem is that there are a lot more line workers in most companies than CEOs. What was it some years ago, something like $1,500 of the price of a car was health benefits for labor?

The salaries of executives should figure in that equation somehow, ya think?

In 2007, it was reported that GM spent $1,635 per vehicle on health care for active and retired workers in the U.S. Toyota paid nothing for retired workers - it has very few - and only $215 for active ones. [source]

In 2007, GM sold about 9.3 million vehicles world-wide and Rick Wagoner's total compensation was about $15.7 million. That works out to about $1.69 per GM vehicle sold world-wide [[or about $5.23 per vehicle sold in the US).

Doing some farmers math, I estimate that the total compensation for GM's entire unclassified executive management staff was about $250 million in 2007, which works out to about $27 per vehicle [[or about $83 per vehicle sold in the US)..

**Cincinnati_Kid** · October-01-10, 01:17 AM

Originally Posted by Mikeg

In 2007, it was reported that GM spent $1,635 per vehicle on health care for active and retired workers in the U.S. Toyota paid nothing for retired workers - it has very few - and only $215 for active ones. [source]

In 2007, GM sold about 9.3 million vehicles world-wide and Rick Wagoner's total compensation was about $15.7 million. That works out to about $1.69 per GM vehicle sold world-wide [[or about $5.23 per vehicle sold in the US).

Doing some farmers math, I estimate that the total compensation for GM's entire unclassified executive management staff was about $250 million in 2007, which works out to about $27 per vehicle [[or about $83 per vehicle sold in the US)..

Nice analysis, still doesn't make it right though. Executive compensation is overated.

**Mikeg** · October-01-10, 07:36 AM

Nice analysis, still doesn't make it right though. Executive compensation is overated.

While Wagoner's total compensation in 2007 was $15.7 million, most of that was because he exercised stock options that had been granted to him in prior years as part of his incentive compensation. Wagoner's actual salary in 2007 was $1.6 million, plus he received $1.8 million in non-equity incentive compensation and nearly $700,000 for other compensation that includes insurance benefits, security, aircraft expenses and other factors [source]. In other words, in 2007 he received $4.1 million in compensation that was not "at-risk" and the other $11.6 million was incentive compensation that resulted from an appreciating stock price.

At $4.1 million in salary, benefits and perks, Wagoner was hardly overpaid for the responsibility of managing a global corporation as large as GM [[that $4.1 million works out to 44 cents per GM vehicle sold that year). What can be reasonably argued is whether he [[and the other execs) deserved all of those incentive stock options that were awarded in previous years for hitting targets that in retrospect were obviously not set high enough by GM's board of directors.

Keep in mind that the stock options are only worth something if the stock price eventually rises higher than what the stock price was when the options were granted. They must be exercised within seven years after they were granted and an executive may decide to exercise several years' worth of options during a single year when the stock price is high.

While the hourly line worker's compensation is guaranteed by contract, executive compensation by design has a significant portion that is "at-risk", meaning that the non-salary portion [[typically the number of shares awarded in the stock option grants) declines or disappears in years when the company is not profitable and vice-versa. Compared to 2007, Wagoner's total compensation was $6.13 million less in 2006 and $0.8 million less in 2008.

Until hourly [[and salaried) workers put a significant portion of their compensation "at-risk" or corporate boards abandon the executive incentive compensation model, I think it is very difficult to make comparative value judgments about line worker and executive compensation.

**MizMotown** · October-01-10, 09:18 AM

it's just more amazing to me how many of you seem to WANT to see less wages and benefits for folks. Your the sheeple the goverments love. Happy for your fellow American and brother to settle far beneath what they worth as a worker and contributor to making the small percentage of the others very, very rich.

**gazhekwe** · October-01-10, 09:42 AM

Deflation is hard. It has to start somewhere. Looks like it is workers and home values that are taking the big hit now. As income continues to drop from unemployment and reduced pay, demand for consumer goods will drop further, and eventually the prices will have to come down. You can kind of see it happening as many retailers are having almost constant sales to move their goods any way they can. Reduced buying power will hit the providers of merchandise, and their costs will have to come down. More reduced wages and employment, more drops in income, and so it goes.

Inflation was rampant in increased wages and high employment rates starting about the late 60s on into the mid-90s. People liked that because their wages rose as the Cost of Living rose, so it wasn't painful. What was an excellent salary in the late 60s got to be entry level pay by the 80s.

We are reversing that trend right now, and NOT calling it deflation, but it is.

**Motor City Sam** · October-01-10, 09:49 AM

Originally Posted by MizMotown

it's just more amazing to me how many of you seem to WANT to see less wages and benefits for folks. Your the sheeple the goverments love. Happy for your fellow American and brother to settle far beneath what they worth as a worker and contributor to making the small percentage of the others very, very rich.

Amen. I have noticed the same thing on this board and other places.