Controversy surrounds dual pay scales

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Over 1995-7, certain collective agreements in Spain have allowed employers to recruit workers at lower wages than workers in the same job grade who are already employed by the firm (the "dual pay scale"). Companies' objectives in reducing labour costs and workers' objectives in creating employment seem to be threatening the principles of solidarity and equality that have traditionally been maintained by the unions.

The development of "dual pay scales" is taking place in a very particular context. According to the Survey of the working population, unemployment rates are currently over 20%, whilst 35% of the working population are on temporary contracts earning very low wages because of the type of contract on which they have been employed (part-time contracts, apprenticeships and so on), or because they are outside the remit of a collective agreement.

So, in the current situation, although the "dual pay scale" - where new recruits are paid at a lower rate than equivalent established workers on the same grade - clearly leads to inequality, it may still provide advantages. However, the question arises whether these improvements in conditions are sufficient reason for the system to obtain general acceptance.

Background

Over the last two years, many collective agreements, especially at company level, have opened the way for employing workers on lower pay than that of established employees in the same grade doing the same job.These workers are not apprentices, but fully-fledged workers who have suitable skills to carry out their job.

Agreements on a dual pay scale are generally being reached in relatively large companies that have improved their position in the market and intend to employ a large number of workers. The pay differential is proposed by the companies concerned and accepted by the unions, on certain conditions outlined below and after lengthy negotiations. As a rule, pay differentials are between 10% and 30% and tend to decrease progressively in relation to length of service. These agreements have almost always been reached at company level, though some sectoral agreements contain clauses that are similar to the dual pay scale.

Crucial issues

The dual pay scale affects the basic elements in the pay package: agreed pay, bonuses and other non-personal bonuses. It is therefore a major source of inequality.

The dual pay scale does not involve the abolition of the length-of-service bonus, though in some cases this is included in agreements. There is currently a debate on the length-of-service bonus, which may lead to considerable differences between new workers and those with long service records. Some sectoral agreements (for example in the construction sector) have removed the length-of-service bonus from new employment contracts and maintain it for those with permanent contracts as a personal bonus that will gradually disappear.

In most cases these "second-class" wages are temporary, lasting from two to five years, after which workers under these contracts become permanent employees and enjoy all the rights established by the collective agreement that is in force in the company. However, there are also cases in which the new workers remain "second class" even when they obtain a permanent contract. These are the cases that lead to questions over the coherence of this pay policy adopted by the unions, which have a tradition of seeking equal pay for work of equal value.

Position of the employers

The introduction of the dual pay scale is an entrepreneurial initiative which has been proposed for obvious economic reasons. Over the last few years, many companies have reduced their workforce by eliminating the less-skilled job grades. This means that recruiting new workers for grades that are now more skilled than in the past involves higher labour costs. Until now, employers had avoided this problem by offering "atypical" or non-standard contracts of employment. However, the dual pay initiative involves a double advantage: both lower costs for new contracts for a given period; and an increase in productivity in the short and longer term. The unions have accepted this dual challenge, but in some cases, the convergence of pay levels at the end of the temporary period has depended on the economic welfare of the company.

Position of the unions

The position of trade unions and the works councils is of special interest since it indicates a considerable divergence from their traditional standpoint.

The unions claim that to accept lower wages for a period is legitimate, provided that it is in return for creating employment. However, they see it as a temporary solution to the current situation in which the employment crisis requires exceptional measures, though these measures must be kept within limits. For the unions, this position involves a series of conditions that must be laid down in all agreements that include clauses introducing a dual pay scale:

1. The acceptance of this measure must be related to a specific plan for creating secure employment, with sufficient guarantees that it will be implemented. A clear plan for secure employment is quite different from the temporary creation of new jobs, as it involves investment, planning for the future and foresight.
2. There must also be a guarantee that the dual pay scale will not end up undermining the existing stability of employment through the process of replacing better-paid staff with worse-paid staff.
3. The pay differentials that are established should not be excessive; they must be for a period of time that is not too long; and the two scales must gradually converge. All this is seen as a guarantee of pay equalisation at the end of the agreed period.
4. An agreement along these lines must limit the use of insecure employment contracts. This is why many of these agreements place some kind of limit on the company's use of temporary employment agencies, or redefine the terms of apprenticeship laid down in the law of 1994. In other words, the unions wish to make the controlled practice of the dual pay scale into an alternative to the current proliferation of types of insecure employment contract.
5. In order to guarantee the above conditions, several agreements provide for a special committee to monitor their implementation, to make sure that all existing contracts are maintained, that pay is increased in accordance with the agreement, and that there are no "replacement" dismissals. It is not always easy to monitor the results in this way.

It should be pointed out that there are sometimes differences in opinion amongst the unions represented in the companies concerned. Some unions oppose the very idea of a dual pay scale. In general, opposition arises if the union thinks that the conditions established are not sufficiently binding on the company or are difficult to control.

Commentary

Those inside and outside the unions who disagree with dual pay scales stress two types of risk that are being run.

The first is that the notion of two classes of workers will be consolidated, segmenting the labour market even further and also greatly hindering the unions' attempts to work towards terms and conditions common to all employees. Such attempts will clearly prove difficult to achieve if the dual pay scale is accepted for an indefinite period. It is little justification to point out that the workers entering the company through such measures may enjoy better conditions than many who have insecure contracts. Indeed, it is one thing to accept insecure conditions of employment because there is no alternative, given the existence of a law or regulation, but quite another to negotiate unequal conditions for the same job. However, this risk seems to be avoidable if the measure has a time limit; that is to say, if after several years there is a convergence of pay scales. The current employment crisis would justify such a practice.

The other risk is inherent in the capacity of works councils to monitor the agreed conditions and development of the dual pay scale. In small companies or companies with works councils that are not very strong, or when the special implementation committees are deprived of verifiable information, there is a certain danger that the company will not respect the end of the period or will surreptitiously replace secure staff in the company with cheaper new workers. In this respect, it seems obvious that works councils' control measures must be reinforced through vigorous participation of the workers under both new and old contracts.

This seems to be a new means of defending employment in which the unions must practise moderation, but also control. (Fausto Miguélez, QUIT)