|Firms See Long-Sought Goal in Sight: Major Pay Cuts
by Roger Bybee
November 24, 2010
THE OUTLINES OF A massive new structural downshift in
wages are emerging more and more clearly.
The largest wage-cutting wave since the Great
Depression has already been sweeping the United States
for the last couple years in response to the Great
Recession. At small firms, many of these pay cuts have
been viewed as a temporary means of reducing costs
until the recession is fully ended.
The pervasiveness of this trend undoubtedly leads much
of the public to assume large corporations are merely
seeking the same temporary relief as small firms when
they demand concessions in high-profile negotiations.
The workers' pay will surely rise back to previous
levels when the situation improves for the company, as
occurred during the 1980s, right?
Not this time around.The recession camouflages a far
more insidious and long-lasting corporate strategy:
Instead of temporary pay cuts to get through a few
tough months, major corporations have something very,
very different in mind.
As NY Times economics reporter and The Disposable
American author Louis Uchitelle wrote on Sunday, major
firms are on the verge of consolidating a long-sought
goal with a two-tier wage system:
The managers of some marquee companies are aiming
to make this concession permanent. If they are
successful, their contracts could become blueprints
for other companies in other cities, extending a
wage system that would be a startling retreat for
Though union officials said they could not readily
supply data on the practice, managers have been
trying to achieve this for 30 years, with limited
These firms are systematically implementing a major
strategy to permanently drive down wages far below
anything considered "middle class." The key tool for
corporations: forcing acceptance of permanent two-tier
wage structures and the insertion of nonunion casual
workers into union plants to drive down union pay to
levels unimaginable a couple years back. Big business
is essentially trying to take back the hard-won gains
of working people won over generations.
As I reported on this site in various articles, the
two-tier trend has emerged this year in Wisconsin at
Mercury Marine (see here, here, and here) and Harley-
Davidson (here, here, and here) and was demanded at the
Kohler Corp. (here and here.) In each case, the
powerful threat of relocating jobs provides the
corporations overwhelming leverage to impose their low-
wage vision of the future for working people.
According to Uchitelle,
The Kohler Company, another manufacturing giant in
southeastern Wisconsin, famed for its gleaming
bathroom fixtures, is negotiating a contract using
Harley's pact as a template and, so far, getting
much of its way.
No doubt other corporations will find the "template"
appealing because of the sharp cuts in labor costs it
will permanently deliver. Kohler, for example, has been
demanding a reshaping of the labor force along these
* Tier A would be composed of currently employed
workers-would face a five-year wage freeze, with
current wages averaging $22.54 an hour.
* Tier B would be comprised by new hires and those
on layoff for more than 90 days, and they would
earn 35% less (about $14.70 an hour) and be
burdened with a high-deductible healthcare plan
offering minimal coverage.
* When a Tier A worker retires, his or her place
would be taken by a Tier B worker-who would remain
stuck in Tier B.
* The lowest-caste of "casuals" could work up to
25% of total hours in the plant under the company's
demands. They would also receive $14.70. Ineligible
for union membership, they could be discarded at
any time. They would also receive no healthcare
LOWER AND LOWER
At Harley, as Uchitelle notes, "The Milwaukee
agreement, recently ratified, will shrink the full-time
payroll to 900 from 1,250 today and more than 1,600
before the recession. Up to 250 'casuals'...will be
used to handle surges in demand for Harley bikes."
Mercury Marine, Harley-Davidson and Kohler have been
pursuing a more advanced form of what many other firms
have achieved. For example, new workers at GM and
Chrysler are making just $14.50 an hour for grueling
work on the assemblyline. Caterpillar also has imposed
a two-tier wage system after long-running wars with the
UAW in the 1990s, as has Delphi.
Expect the downward wage spiral to continue under
relentless pressure from corporations who see an
endless surplus army of labor with 9.6% unemployment
and benefits running out for two million in December.
For example, "Toyota 's goal has become $12.64 an hour,
the median wage for comparable manufacturing in
Kentucky, where it has its largest plant, or $10.79 in
Alabama, where it is building a new plant," reports UC-
Berkeley Prof. Harley Shaiken, a long-time scholar on
labor issues and the auto industry.
Given the steadily-rising profits and the plummeting
wages, Professor Andrew Sum of Northeastern
University's Center for Labor Market Studies, concludes
grimly that this period of economic recovery 'has seen
the most lopsided gains in corporate profits relative
to real wages and salaries in our history.'
RESULT: STUNNING INEQUALITY
Sen. Bernie Sanders more precisely outlined the
outcomes of this unequal sharing of American prosperity
as wages have been falling:
The statistics on income distribution in the U.S.
are staggering in their inequality. According to
the latest analysis, in 2005 the top 1 percent
earned more income than the bottom 50 percent of
Americans-with the top 300,000 earners making more
money than the bottom 150 million.
With the continuing imbalance of power between workers
and corporations, we can expect the picture to grow
only more lopsided until workers discover new modes of
effective resistance to unbridled corporate power.
[Roger Bybee is a Milwaukee-based freelance writer and
progressive publicity consultant whose work has
appeared in numerous national publications and
websites, including Z magazine, Dollars & Sense, Yes!,
The Progressive, Multinational Monitor, The American
Prospect and Foreign Policy in Focus. Bybee edited The
Racine Labor weekly newspaper for 14 years in his
hometown of Racine, Wis., where his grandfathers and
father were socialist and labor activists. His website
can be found here, and his e-mail address is