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 union for clerical and technical workers is fighting the system. As union chief negotiator Michael Boyle argues from a human resources perspective with respect to the two-tier wage system, “Creation of two-tier wage systems causes massive problems for employees”.
Apparently many other unions and employees are opposed to two-tier wage systems in any form. Other companies like United are creating new divisions in order to increase competitive advantage by cutting costs through two-tier wage systems. United recently announ...