Last Updated 26 Jan 2021

Wage Inequality in the Automobile Industry

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Wages are always a major issue in any industry, especially in our fast-changing time that is characterized by the influx of global trade. The management is always concerned with wage and benefit issues because its ability to compete depends to some extent on its labor costs. Firms producing equivalent output with lower labor costs will have higher profits and be better able to operate during downturns. Both labor and management are concerned about a variety of pay aspects.

Wage inequality is measured with the overall level of pay, but it is also concerned about how pay rates and pay increases are determined for different jobs and about the mix of wages and benefits paid to employees. With such issues, labor unions attend to bargaining with the management to forge in other industries but, because of global competition and deregulation, upward pattern bargaining across industries has declined. While not denying employers’ rights to a return on investment, unions would not necessarily agree that profit maximization is a firm’s primary goal.

Unionization aims to increase the power of workers to increase their share of the firm’s revenue. Unions also want uniformity in wage rates for the same jobs in different locations of the same company. For example, an auto assembly worker at Ford’s Twin Cities (Minnesota) assembly plant earns the same rate as another on a similar job in Wixom, Michigan, or Atlanta, Georgia. These patterns within a single employer are eroding, however, as plant-level negotiations often lead to concessions in older, less efficient plants to avoid shutdowns and the resulting loss of jobs. Income inequality is also a component of the equity demand.

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Unequal distributions exist where different workers in different jobs earn different pay. From a union standpoint, excessive inequality would be related to differences between production workers, professionals, and executives that are larger than members can justify. For the union, inequality suggests there may be an opportunity to redistribute income from higher- to lower-level jobs. When profits are increasing, unions expect to receive pay increases. They avoid accepting reduced pay when profits decline, but may concede when employers have incurred substantial losses and job losses for union members would be the alternative.

Some internal union critics have condemned concessions, arguing that past labor leaders would not have accepted them. As long-time UAW president Walter Reuther’s speeches, the UAW president condemned initial auto concessions in the early 1980s. Labor issues in the automotive industry is handled by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), one of the largest and most diverse unions, with members in virtually every sector of the economy.

Wage Inequality in the Automobile Industry essay

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