Two-Tier Wage System

Two-tiered wage and benefit systems of compensation were popular in the 1980s, an era of high unemployment, widespread factory shutdowns, and shrinking corporate profits. Often labeled a training wage in this era, allowed employers to pay a sub-minimum training wage to new employees. The wage was unpopular with workers, not adopted by many employers who found its administration costs more than any savings that accrued, and eventually died from a lack of interest. As one critic argues, "By creating a two-tier wage system, Congress made new employees second-class citizens in the workplace".

The stigma of an economic second-class in the workplace is often associated with two-tier wage and benefit systems. While many of them are impermanent and last for short durations, many are permanent. Because of trends in the modern corporate environment to cut costs at all measures, two-tier wage and benefit systems are regaining popularity among many CEOs and even some unions trying to keep numbers from shrinking and increased lay-offs are going along for the package.

In today's workplace, many different kinds of two-tier wage systems are being tried. For example, many companies are paying new-hires less wages than those on the job, like Yale University, where "newly hired [clerical and technical] workers receive less than current employees". As with most attempts to implement two-tier wage systems, Local 34 uni

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ck after a two-tier wage system was proposed during contract negotiations. The two-tier wage proposal would give new-hires lower benefits, a different pension and lower wages for a temporary period of time. Honeywell Chairman and CEO Michael Bonsignore said that "maintaining control over costs at every level of the company is crucial to meet the needs of customers". One must doubt that two-tier wage systems are effective means of controlling costs. Can companies attract, retain, and motivate employees while paying them significantly less than other employees for the exact same work? Can companies be sure they will not expend more of training costs from loss of employees who will leave for better opportunities? As these and other questions are considered, it is likely that the future of employee compensation packages will continue to be shaped by the central force of employer-employee relations. Another question that must be considered is if it is inherently unfair to expect workers to perform that exact same jobs for different rates of pay? This is an especially provoking question when one considers there is virtually no statistical or economic data that proves two-tier wage systems add value to an organization. Accord

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