Union Battles Alaska Air’s Two-Tier Wage Plan

For nearly a month, the 700 mechanics at highly profitable Alaska Airlines have been on strike over an issue that at first glance appears not to affect them: the company’s demand that it be allowed to hire new mechanics at a lower pay scale.

But the mechanics say Alaska Air’s attempt to impose what is known as a two-tier wage scale, modeled on contracts at other airlines, not only would be unfair to new workers but could also have a very negative effect on veteran employees as well.

“A new employee would start at a greatly reduced starting wage (called the B scale), and it will take that person 12 years to reach the top of the scale,” compared to two years at the present A-scale rate, said Dean Stephens, who works in Alaska Air’s engine shop at the company’s main terminal in Seattle.

“Any person in that job will know the job in three to five years,” Stephens said. “To take 12 years to advance to the top is unreasonable. . . . Here you’ll have two mechanics; one guy is getting 40% less than the other, and the only reason is he got hired later.”

According to company officials, Alaska Air expects to double its capacity and its work force in the next five years. Stephens said that, if the new employees become a majority, the company will be able to pit the two sides against each other, with the result that the wages of veteran employees could be lowered.

“The company could offer to raise the new employees by a dollar an hour and lower our wages by a dollar an hour. If there are more of them, we’ll lose,” he said.

Alaska Air officials won’t comment on how much lower the new scale will be (the current top scale for mechanics is $31,500 a year). But they said that Stephens’ fears are exaggerated. Moreover, spokesman Jim Johnson said that it is hardly clear that the company will employ twice as many mechanics in five years as it does now.

But he called the two-tier wage system a key factor in the company’s ability to remain profitable and expand.

“Even though we’re profitable today, if we didn’t get the B scale in place, down the line we’d have a problem,” Johnson said. “It’s the only way to get costs down, and the existing employees don’t lose anything.”

Johnson also said Alaska Air was simply following a pattern set by 11 other airlines.

Indeed, when American Airlines first garnered a two-tier wage scale from its pilots and machinists in 1983, it was considered revolutionary. But now almost every major carrier--and a growing number of smaller carriers--has secured some form of two-tier system from at least one, and often all, unions.

Audrey Freedman, a labor economist at the Conference Board, a New York-based business research organization, said there is a simple reason for this proliferation.

“It’s easier for union leaders to sell,” she said. “The ones who are voting (current employees) are not the ones who have to deal with it.”

Freedman said the development is also a reflection of the fact that “management has increasingly gained the upper hand in negotiations.”

Two Types of Plans

Jerry Glass, a spokesman for the Airline Industrial Relations Conference, a Washington-based trade group, said that “these new hire scales are a fact of life in the industry now.”

He noted that there are two types of two-tier wage scales. Under the “permanent two-tier,” the wage rates for employees hired after a certain date will always be lower.

For example, Glass said, an American Airlines pilot with at least 12 years’ experience who was hired on the A scale before February, 1983, earns $9,000 a month for flying 75 hours. But a pilot hired after February, 1983, on the B scale earns $4,500 a month for the same flying time.

Under the second type, the “merging scale,” an American mechanic hired before February, 1983, started the current contract period at $16.60 an hour and after 2 1/2 years was receiving the top rate of $17.79 an hour. But mechanics hired after February, 1983, started at only $10 an hour.

Eventually--in American’s case, 12 1/2 years--the new mechanics will be able to reach the top of the scale. That figure of $17.79 is likely to increase by the time those mechanics achieve parity with the people hired earlier, Glass emphasized.

Delta, Eastern, Northwest, Piedmont, United and Western have a merging B scale for flight attendants. In negotiations ended this week, Pan Am, however, got a permanent two-tier plan.

Glass said he is not aware of any definitive study of how much any airline has saved with a two-tier scale. But he stressed that an airline that is expanding could save a lot through the use of a B scale.

Joseph Madison, research director of the Transport Workers Union, which represents American Airlines’ mechanics, said that, six months after the 1983 contract went into effect, he analyzed American’s savings.

He said he calculated that two-tier scales with flight attendants, pilots, mechanics, baggage handlers and dispatchers were saving the company $500,000 a week.

“This would be $65 million over the course of the 2 1/2-year contract,” Madison said.

Hurting Productivity

American said it could not confirm these figures.

Madison said he is concerned about the effect of two-tier scales on the morale of lower-paid employees. Union members have told him that the B scales are hurting productivity.

Randy Barber, a Washington-based financial analyst who assists unions, expressed similar concerns.

“It’s very clear that a two-tier causes a lot of problems internally for unions,” Barber said. “Generally, you have a burgeoning conflict between people at different rates. It’s a time bomb.”

But Linda Johnson, an American Airlines spokeswoman, said the company has not seen a decline in productivity.

“While we recognize there is a potential there for some problem, we have taken a number of steps to ensure that morale remains high,” Johnson said.

She said the steps included starting a quality-of-work-life program “whereby employees are encouraged to make suggestions to improve their own work environment and to be part of the decision-making process.”

The airlines also are dangling the prospects of growth and promotions for their employees when trying to sell the two-tier systems, said Louis Marckesano, an airline analyst at Janney Montgomery Scott in Philadelphia.

But he said moneymaking airlines such as Alaska--which has made a profit for 12 consecutive years--are having a more difficult time getting their employees to accept two-tier scales than airlines that have been losing money.

Major Point of Conflict

Pan American World Airways’ mechanics, represented by the Transport Workers Union, told negotiators for the financially ailing company this past winter that they would accept a two-tier pay scale, but they nevertheless waged a nearly monthlong strike over other issues.

The two-tier wage scale has been the major point of conflict in negotiations between Alaska Air and the International Assn. of Machinists, the union that represents the company’s mechanics. But it is not the only issue in the strike.

The company also is attempting to win the right to use more part-time personnel and to change work rules that it contends are cumbersome and curb productivity. The machinists contend that the airline’s profits--nearly $24 million last year--indicate that the company’s efficiency is up to par.

The airline has offered the machinists a small pay increase. Last Saturday, union negotiators rejected the company’s latest proposal. And on Monday the company announced that it had implemented the B scale for mechanics, baggage handlers and other ground employees that it had temporarily hired to replace striking workers.

In addition, the company said that it is now offering permanent positions to those replacements and that it expects to have a full complement of ground personnel hired by Friday and a full complement of mechanics hired by month’s end.

Alaska Air spokesman Johnson said the strike so far has not had a significant effect. Pilots have crossed the picket lines since the start of the walkout March 4. And on March 19, flight attendants returned to work after accepting a new three-year contract that included a lower pay scale for new employees.

Johnson said the company has reached 85% of its normal capacity. Union officials said the figure is exaggerated.