All posts from Sonal
Sonal in Smart Investing & Retirement Plans,

First wage hike in 10 years for U.S. autoworkers !

Four-year contracts between the UAW and General Motors (NASDAQ:GM), Ford (NASDAQ:F) and Fiat Chrysler (NASDAQ:FCAM) expire this September as all three automakers recorded strong sales and profits .

After a good profit Union leaders hope to win a raise in base pay for about 100,000 veteran workers for the first time since 2005.

More recent contracts have awarded workers profit sharing payments and the promise of new jobs , but no wage hikes. Those came after several rounds of talks when the union agreed to concessions, including setting up a lower wage and smaller benefit package for new hires.

While everyone expected to raise the wages this time around , the real fight will be over the two-tier wage system that pays 40,000 new hires $19.28 an hour for doing the exact same jobs as veteran workers earning $28 an hour.

Art Schwartz, president of Labor and Economics Associates, and the former head of labor relations at GM said :

"The big objection right now is when two people are standing next to each other on the assembly line and getting different pay,"

 There's been a hiring boom at U.S. automakers over the last five years thanks to both the rebound in car sales and the lower wage structure.

"A lot of jobs were saved and created by the second tier," said Schwartz. "Getting rid of the lower tier would put those jobs in jeopardy. I don't think the union leadership would want to do that."

But even Fiat Chrysler CEO Sergio Marchionne says the two-tier system is unsustainable.

"There can't be two classes for people who do the same work," Marchionne told reporters at the Detroit auto show in January, according to reports. "It's impossible. It's almost offensive."

Comments by the Readers on CNN Money :

"Our incomes - be they large, small or somewhere in between - reflect (1) our usefulness to our fellow citizens and (2) the ease with which fellow citizens can find substitutes for us." -- Norman Van Cott

That's true under a free market for labor. But unions have a labor monopoly, and set the price. That works marginally well in the public sector. But in the competitive private sector CONSUMERS set prices, and therefore ultimately determine wages. Stockholders, management and workers serve CUSTOMERS or they go out of business, lose their jobs. Like happened to GM, because unions serve only the interest of WORKERS, not consumers.

Sadly, "creative destruction" is absent from the public sector. Until it goes totally bust, like Detroit did, and NJ soon will."

"I hope they get everything and anything they want. They should feast again before the prolonged (and potentially terminal) famine. Don't forget: every vehicle you buy will go toward paying the tax for their solid-gold health care plan come 2016."