The Organizational Reward System and Employee Benefits.

By February 2004, the strike by Southern California grocery workers against the state’s major supermarket chains was almost 5 months old. Because so many workers were striking (70,000), and because of the issues involved, unions and employers across the country were closely following the negotiations. Indeed, grocery union contracts were set to expire in several cities later in 2004, and many believed the California settlement—assuming one was reached—would set a pattern. The main issue was employee benefits, and specifically how much (if any) of the employees’ health care costs the employees should pay themselves. Based on their existing contract, Southern California grocery workers had unusually good health benefits. For example, they paid nothing toward their health insurance premiums, and paid only $10 co-payments for doctor visits. However, supporting these excellent health benefits cost the big Southern California grocery chains over $4 per hour per worker. The big grocery chains were not proposing cutting health care insurance benefits for their existing employees. Instead, they proposed putting any new employees hired after the new contract went into effect into a separate insurance pool, and contributing $1.35 per hour for their health insurance coverage. That meant new employees’ health insurance would cost each new employee perhaps $10 per week. And, if that $10 per week weren’t enough to cover the cost of health care, then the employees would have to pay more, or do without some of their benefits. It was a difficult situation for all the parties involved. For the grocery chain employers, skyrocketing health care costs were undermining their competitiveness; the current employees feared any step down the slippery slope that might eventually mean cutting their own health benefits. The unions didn’t welcome a situation in which they’d end up representing two classes of employees, one (the existing employees) who had excellent health insurance benefits, and another (newly hired employees) whose benefits were relatively meager, and who might therefore be unhappy from the moment they took their jobs and joined the union.

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From the grocery chains’ point of view, what is the downside of having two classes of employees, one of which
has superior health insurance benefits? How would you suggest they handle the problem?

Please provide a minimum of 500-word paper and two references of your answers in APA format.