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What is the 'two-tiered wage system' fueling worker strikes?

“If you’re not equal in pay, you’re not equal,” said one labor union representative.
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In growing numbers, workers across the country are taking a stand and demanding better conditions, benefits and pay from their employers. While their workplaces vary, ranging from Nabisco and Kellogg to John Deere to Kaiser Permanente, employees are united in at least one of their grievances: opposition to a two-tier benefit and wage system.

The policy, which is often adopted by companies as a way to cut costs, creates two different pay and benefit structures for existing and future employees. For the length of a given contract, existing workers are grandfathered in and guaranteed certain benefits and pay rates, while future employees are hired at a lower pay rate and often receive fewer or worse benefits.

Existing workers oppose the policy for several reasons, including that it creates disparities among workers doing the exact same job and essentially penalizes those who join the company later, which can hurt morale, create animosity and lead to high turnover.

“These future workers are like unborn babies,” said David Woods, international secretary-treasurer of the Bakery, Confectionery, Tobacco Workers and Grain Millers' International Union, or BCTGM. “They don’t have a face or a name yet, but we know they’re coming behind us. Companies want to take away from future employees and that isn’t acceptable.”

A two-tier pay or benefit system can also chip away at the power of labor unions since new hires may be less inclined to join, leading to lower union membership and divided workforces. For existing workers, there’s also the concern that adopting such a system could impact their future contracts, which might be subject to the lower-tier conditions.

While these two-tier systems aren’t new, they’re certainly having a moment as workers across industries actively resist them.

“Employers do them in waves because they tend to lead to low morale and if you institute them over and over again they cause more problems,” said Kate Bronfenbrenner, director of labor education research at Cornell University's School of Industrial and Labor Relations. “We see them whenever there’s an economic crisis. There was a big push for them in the ‘80s, then a wave in the ‘90s and now we’re seeing them again. It appears to be contagious.”

Bronfenbrenner said these systems not only create frustration and tension but can lead to productivity and safety issues. She said it also doesn’t make sense to implement these systems when there are labor shortages like the ones currently being seen in low-wage jobs and health care.

In early October, workers at Kaiser Permanente voted to authorize a strike over unhappiness with workplace conditions and the possibility of a two-tiered system as they continue to struggle through the pandemic.

“Companies brag about record profits, while workers work record hours.”

“While we’re saving the world, they’re planning our demise, it seems,” said Kim Mullen, a nurse at Kaiser South Bay in Los Angeles and a union officer who helped organize the strike vote. “It’s so insulting after all we’ve done, that they’re being manipulative.”

Kaiser insists the changes are necessary to maintain existing standards of care and affordability.

“[W]e are proposing a market-based compensation structure for those employees hired in 2023 and beyond that will allow our new employees to be paid above market wages on average, receive the same excellent, market-leading benefits, and enable us to continue attracting and retaining top talent,” Arlene Peasnall, senior vice president of human resources at Kaiser Permanente, said in a statement.

The two-tier system is an attempt to break the union and create disharmony among workers, said Jane Carter, a research director for United Nurses Associations of California/Union of Health Care Professionals, or UNAC/UHCP.

“Their true intent can only be assumed to be wage-cutting and not cost-cutting,” Carter said. “I don’t understand how employer and corporate execs can offer these proposals and expect to retain the current workforce they have, much less recruit future hires, especially during a worker shortage.”

These are common themes within the ongoing worker unrest, according to Woods, the international secretary-treasurer of BCTGM, which represents Nabisco and Kellogg workers.

“There’s anger about not being appreciated through the pandemic,” Woods said. “Companies brag about record profits, while workers work record hours.”

In September, Nabisco workers ended a weekslong strike after successfully opposing several proposed changes, including a two-tier benefit system that would have offered lower-quality but more expensive health care benefits to new hires. Neither Nabisco nor its parent company, Mondelez International, responded to a request for comment.

Workers at Kellogg and John Deere are currently striking in opposition to several issues, including two-tiered wage and benefit systems.

John Deere did not respond to an NBC News request for comment.

At Kellogg, workers allowed a one-time concession in 2015, granting the company the ability to temporarily institute a two-tiered system with tight caps for how many workers could be considered transitional versus legacy. Now, workers say Kellogg wants to make that concession permanent, which they’re unwilling to do. Kellogg disagrees.

“The union agreed to a two-tiered system in 2015 to help address rising labor costs, which were out of sync with the market and the rest of our network,” Kellogg spokesperson Kris Bahner said in a statement. “We paid a $15,000 signing bonus to each hourly cereal employee in exchange for these changes. Now the union wants to go back on that agreement.”

Kevin Bradshaw, a Kellogg worker and vice president of Local 252G in Memphis, Tennessee, said agreeing to such a system on a permanent basis would be akin to selling out future co-workers, and that being asked to do so is saddening, especially with all the sacrifices workers have made during the pandemic.

“If you’re not equal in pay, you’re not equal,” said Kevin Bradshaw, a Kellogg worker and vice president of Local 252G in Memphis, Tenn. “We’re fighting corporate greed because none of the companies asking for a two-tier system actually need it, they just want it. Time has run out on giving companies big concessions, settling for things and not fighting back.”