To help them avoid unionization, companies employ many different strat

QUESTION

To help them avoid unionization, companies employ many different strategies. One of them is that they have adopted two-tier pay scales, in which veteran employees make more than new employees.

What is the system that the two-tier system replaced?
What will be an ideal response?

ANSWER

Answer: The two-tier system replaced pattern bargaining, in which unionized employees working in similar jobs for similar companies or industries get the same pay.
Explanation: Labor negotiations started out (in an activity known as pattern bargaining) negotiating similar wage rates for unionized employees working in similar jobs for similar companies or industries, but now that has changed. The pressure of deregulation at home and competition abroad has forced many unions to negotiate two-tier wage contracts, in which new employees are paid less or receive lesser benefits than veteran employees. Employing the two-tier pay scales is one way that companies can effectively undercut union power.