Two Tier pay in the US auto industry

A New York Times article (Sept 13, 2011) describes the practice of hiring new workers at $ 14 per hour while paying older workers twice that amount. These new employees permit manufacturing at price points comparable with global competition and are part of a growing trend in Detroit. Quality and productivity are comparable across the two groups. But the new pay scales imply that workers will not be able to afford the cars they produce with a year’s salary.  Is being globally competitive with these significantly lower wage rates a long term effective strategy to compete ? Will lack of opportunities to move to the higher pay scales cause attrition and thus a constant need for training ? Is the auto workers union’s approval of these lower wages to be competitive as an effective approach to ensure domestic production an effective long term strategy ?

About aviyer2010

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