Hourly workers—people who are paid a set dollar amount for each hour they work—have long been the backbone of the U. S. economy. But times are changing, and with them so also is the lot of the hourly worker. As they can with most employment conditions, organizations are able to take a wider variety of approaches to managing compensation for hourly workers. And nowhere are these differences more apparent than in the contrasting conditions for hourly workers at General Motors and Wal-Mart. General Motors is an old, traditional industrial company that until recently was the nation’s largest employer.
And for decades, its hourly workers have been protected by strong labor union like the United Auto Workers (UAW). These unions, in turn, have forged contracts and established working conditions that almost seem archaic in today’s economy. Consider, for example, the employment conditions of Tim Philbrick, a forty-two-year-old plant worker and union member at the firm’s Fairfax plant near Kansas City who has worked for GM for twenty-three years. Mr. Philbrick makes almost $20 an hour in base pay. With a little overtime, his annual earnings top $60,000.
But even then, he is far from the highest-paid factory worker at GM. Skilled-trade workers like electricians and toolmakers make $2 to $2. 50 an hour more, and with greater overtime opportunities often make $100,000 or more per year. Mr. Philbrick also gets a no-deductible health insurance policy that allows him to see any doctor he wants. He gets four weeks of vacation per year, plus two week off at Christmas and at least another week off in July. Mr. Philbrick gets two paid twenty-three-minute breaks and a paid thirty-minute lunch break per day.
He also has the option of retiring after thirty years with full benefits. GM estimates that, with benefits, its average worker makes more than $43 an hour. Perhaps not surprisingly, then, the firm is always looking for opportunities to reduce its workforce through attrition and cutbacks, with the goal of replacing production capacity with lower-cost labor abroad. The UAW, on the other hand, of course, is staunchly opposed to further workforce reductions and cutbacks. And long-standing work rules strictly dictate who gets overtime, who can be laid off and who can’t, and myriad other employment condition for Mr.
Philbrick and his peers. But the situation at GM is quite different—in a lot of ways—from conditions at Wal-Mart. Along many different dimensions Wal-Mart is slowly but surely supplanting General Motors as the quintessential U. S. corporation. For example, it is growing rapidly, is becoming more and more ingrained in the American lifestyle, and now employs more people than GM did in its heyday. But the hourly worker at Wal-Mart has a much different experience than the hourly worker at GM. For example, consider Ms.
Nancy Handley, a twenty-seven-year-old Wal-Mart employee who oversees the men department at a big store in St. Louis. Jobs like Ms. Handley’s pay between $9 and $11 an hour, or about $20,000 a year. About $100 a month is deducted from Ms. Handley’s paycheck to help cover the cost of benefits. Her health insurance has a $250 deductible; she then pays 20 percent of her health-care cots as long as she uses a set of approved physicians. During her typical workday, Ms. Handley gets tow fifteen-minute breaks and an hour for lunch, which are unpaid. Some feel that conditions are inadequate.
Barbara Ehrenreich, author of Nickel and Dimed: On (Not) Getting By in America, worked at a Wal-Mart while researching her book and now says, “Why would anybody put up with the wages we were paid? ” But Ms. Handley doesn’t feel mistreated by Wal-Mart. Far from it, she says she is appropriately compensated for what she does. She has received three merit raises in the last seven years and has ample job security. Moreover, if she decides to try for advancement, Wal-Mart seems to offer considerable potential, promoting thousands of hourly workers a year to the ranks of management.
And Ms. Handley is clearly not unique in her views—Wal-Mart employees routinely reject any and all overtures from labor unions. In the twenty-first century, the gap between “Old Economy” and “New Economy” workers, between unionized manufacturing workers and nonunion or service workers, may be shrinking. Unions are losing their power in the auto industry, for example, as foreign-owned plants within the United States give makers such as Toyota and BMW, which are nonunion, a cost advantage over the Big Three U. S. automakers. U. S.
firms are telling the UAW and other unions, “We’re becoming noncompetitive, and unless you organize the [foreign-owned firms], we’re going to have to modify the proposals we make you. ” At the same time, Wal-Mart is facing lawsuits from employees who clam the retailer forced them to work unpaid overtime, among other charges. At Las Vegas store, the firm faces its first union election. In a world where Wal-Mart employs three times as many workers as GM, it may be inevitable that the retailer’s labor will organize. On the other hand, will labor unions continue to lose their power to determine working conditions for America’s workforce?
References: Joann Muller, “can The UAW Stay in the Game? ” Business Week, June 10, 2002. HYPERLINK “http://www. businessweek. com” www. businessweek. com on June 3, 2002; Mark Gimein, “Sam Walton Made Us a Promise,” Fortune, March 18, 2002. HYPERLINK “http://www. fortune. com” www. fortune. com on June 3, 2002. Case Questions 1. Compare and contrast hourly working conditions at General Motors and Wal-Mart. 2. Describe the most likely role that the hourly compensation at these two companies plays in motivating employees. 3. Discuss how goal setting might be used for each of the two jobs profiled in this case.