Abstract
The two-tier system
The basic principle of unionism is “Equal pay for equal work.” This principle implies that workers or employees who indulge in a comparable job or work should be compensated by the same salaried pay or an equal hourly rate. However, this is not always the case because often, monetary compensation for the employees are tied into seniority, creating a two-tier employee remuneration plan. This sudy purposed to establishing the features, challenges, solutions, and the future of the two-tier wage system by comparing the points of view from the leading players in this system including employers, employees, and the unions. Through the review of the related scholarly work, the study concludes that the unions and the workers should resist against a permanent two-tier wage plans. The paper suggests that the employer should negotiate lower starting rates, longer progression schedules toward the top rate. The company should, however, not have the right to toy with its workers pay.
Keywords: Employer, employee, two-tier, single-tier, union, wages.
Introduction
A two-tier wage structure is characterized by lower pay for newer employees and higher pay for the more seasoned and experienced employees who typically have the same job descriptions and perform the same job type. This payment structure is meant to help the business maximize efficiency while minimizing costs. The business may also employ this strategy to reduce costs both in the short and long run, to achieve higher profit margins while creating a more divided employee base.
The two-tier system ensures that the total budgetary allocation by the business towards wages and benefits goes down. Contrarily, it ensures that production is constant. The result is a reduced unit cost per product hence reduced prices which improve the business competitiveness. The business can also reduce labor costs by relacing the high -tier workers with low tier employees upon their retirement. The two-tier wage plan causes conflict among workers because the members of the low tier feel unfairly treated; they, therefore, grow resentment against the better-paid workers resulting in conflict and division. A divided workforce is an advantage for the business because it becomes more difficult for the union o bargain collectively.
Employees view the concept of two tire jobs from a variety of angles. On the one hand, as postulated by (CITE), a section of the employees those in the higher-tier have high regard for the two-tier wage concept. They argue that it prevents the massive laying off and retrenchment of employees and therefore, the best option for ensuring job security. However, many workers within the low tier believe that the concept is retrogressive and undermines the new employees as far as payment is concerned given that they produce the same output with those considered of the higher tier. Contrarily, a few members of the low tier appreciate the concept because the program, albeit the payment terms, it ensures the unemployed a job opportunity.
The concept of two tire wage plans has diverse impacts on the level of employee motivation, management, retention, and training in an organization. For instance, many workers of the low tier end up being less motivated as a result of low pay. These employees are also less motivated due to the feeling of resentment from the senior workers. The resentment may, on many occasions impede productivity due to tension among workers leading to hostile and unstable workplaces. The resentment is responsible for discontent among the members of the low tier, which leads to a high degree of employee turnover. The high turnover may prove costly in the long run for the business compared to maintaining a one-tier wage plan. For example, in a group of 20 workers where the wage is $50,000, employee turnover can cost a business over $100,000 annually (Mathew, 2019).
According to the report by Mathew (2019), nearly one in three employees (32%) will change workplaces from their current employer. The data from many businesses across the United States also show that nearly 70% of employees earning $7.25/ hour (which is the federal minimum wage) will change working places within a year. This number is more than double the average rate of turnover of 32%. The researcher, in his report, established a strong correlation between employee turnover and the hourly wage thresholds.
The two tire wage system also negatively affects unions. The plan creates discontent among some union members; this will impede the collective bargaining process, which ensures a fair compensation leading to strikes or the fracturing of the unions and formation of different factions. In many countries, unions reject such a plan in totality. Therefore employers implementing such systems risk facing rejection, resistance, and hostility from the unions and the workers.
As argued by (CITE), even though the two tire pay structure can help save a business on new hires, studies have revealed that it can demotivate workers in the low tire due to low pay. How can then a business overcome this challenge? Research as shown that, helping employees focus on other business elements rather than pay is a strategy that a business can use to motivate their staff. The employee should go beyond the external motivational aspects like promotions, bonuses, and wages to the internal factors. These factors within the employees and help employees stay enthusiastic and motivated in their work. The internal factors include the feeling of making a contribution and the satisfaction that come from achieving personal goals. A business should realize the role of these internal factors on the motivation of low tier employees.
By setting a specific team and individual goals together with the employees of the business, the business is able to shift the goal of the workforce from monetary compensation to working towards the desired outcome. The team goals encourage collaboration among workers, while individual goals generate competition among employees for better productivity. When both tiers of the workforce are engaged in the goal-setting process, the workers will not only compete across the board, but everyone will be equally responsible for the goals.
Another strategy a business can employ is the provision of feedback and encouragement to the employees to ensure they are motivated to attain their objectives. The feedback mechanism is vital in informing the employees of their progress and initiate adjustments and corrective measures for an employee to remain on target. The encouragement aspect, on the other hand, reminds the employees that they are not alone, but they have support from the employer. It also shows the employees that their contribution is of great value. The employer can choose to meet with the employees as a team periodically to voice their support for each other. The employers can also choose to meet with each employee every week to offer feedback on the progress towards the right directions and to point out the areas that require adjustments.
A business with a two-tier wage plan should craft a mechanism that creates an ecosystem for collaboration and participation. Studies have proved that, when employees in a two-tier payment plan can collaborate on critical business matters, there is a higher chance that they will remain motivated due to the sense of belonging (CITE). The employers should, therefore, ensure that the employees participate in the formation of ideas for business projects and then fast track the implementation of the best practices decided upon into the project.
The future of two tire wage plan
An in depth analysis of the likelihood of continued wage discrimination in the future is outside the scope of this study. The researcher observes the following. First, The American Economy is expanding continuously and actively notwithstanding the regional challenges. Issues of unemployment are slowly but surely falling; it is reasonable to expect pressure on the wage market by the supply excess labor to weaken. Second, the domestic and global economic climate is shifting towards concessive bargaining as a result of the reduction in unit labor costs differences internationally. Finally, there is almost a 100% chance that unions and workers will always resist this retrogressive payment plan. His makes it less attractive for unions to avoid the risks of members concessions.
Conclusion and Recommendation
The study suggests that the unions and the workers should resist against a permanent two-tier wage plans. They should, however, negotiate for lower starting rates and longer progression schedules toward the top rate. The company should never have the right to toy with its workers pay.
References
Boeri, T. (2014). Two-tier bargaining. Available at SSRN 2475326.
MacNeil, M. (2013). Two-tier workplace compensation: Issues and remedies. Canadian Lab. & Emp. LJ, 17, 181.
Last, F. M. (Year, Month Date Published). Article title. Retrieved from URL
Nagl, W., & Weber, M. (2016). Stuck in a trap? Long-term unemployment under two-tier unemployment compensation schemes (No. 231). Ifo Working Paper.