Trade unions in the U.S. appear to be losing the battle against two-tier wage systems, but it’s a trend Canada seems to be resisting for now, according to some labour economists.
“There’s almost none of it here,” said Canadian Auto Workers (CAW) economist Jim Stanford. “That may be due to the fact that 30 per cent of workers in Canada are unionized versus 10 per cent in the U.S.”
South of the border, two-tier systems are in place at General Motors, Chrysler, Caterpillar and auto parts maker, Delphi.
Recently, Harley-Davidson and Mercury Marine have also negotiated lower pay for new hires; bathroom fixture giant, Kohler Co., is using those contracts as a template in its current negotiations.
Stanford said while there has been pressure for two-tier wage scales, particularly from the Big Three automakers and within the manufacturing industry, unions in Canada have largely resisted it.
“We’ve evaded it in Canada by addressing deeper ways to enhance the viability of a company,” he said. “In Canada, we put an emphasis on productivity. We’re 10 – 15 per cent more productive in Canada because we put our attention on boosting the efficiency of an operation rather than allowing a divide and conquer strategy to take hold.”
In 2007, at the depths of the auto crisis at GM and Chrysler, the CAW pledged not to sacrifice wages for younger workers to protect job security.
But in the U.S., where unemployment rates are higher, unions find themselves increasingly caving to the pressure.
Stanford said there’s less willingness among Canadian workers to settle for two-tiered systems — a reflection of “the philosophy of equality among Canadian trade unions.”
“Our historic mandate is to lift up wages across society,” he said. “An injury to one is seen as an injury to all.”
That's not to say two-tier systems are a foreign concept. In the past, the CAW has reluctantly accepted this scale at some manufacturing plants in southwestern Ontario, including the Navistar truck plant in Chatham.
Stanford says two-tier wage systems are more common in the meat packing industry. For example, during industry-wide restructuring several years ago, workers at Mitchell’s Gourmet Foods accepted a contract that allowed lower start rates.
However, a subsequent agreement raised wages on both levels and closed the gap between the two tiers.
Two-tier wage scales have typically been used to drive down costs in hard times, but have generally risen again with a rise in the economy. Although that continues to be the pattern in Canada, it’s not in the U.S.
“Companies are being more aggressive than ever and they’re taking advantage of that fear,” said Stanford. “But unions here have more critical mass and can stand up for themselves better.”
However, he said without legislative changes in Canada the two-tier pattern could eventually trickle north.
“The problem is laws that allow corporations to be mobile and to threaten Canadian workers,” he said. “The pressure comes from things you can legislate, like requirements on foreign ownership. It’s the fault of globalization and a system that allows companies to get the cheapest wages possible.”
Statistically, Stanford said two-tier wage scales drive down wages in the long term and unions find themselves in a race for the bottom.
“Eventually, the younger workers become the majority. Do they then take away from older workers?” he said. “If you accept a wage cut of any kind, it hurts everyone. It’s such a perverse attitude.”