Final answer:
Whether General Motors can afford to give pay raises depends on factors like the total compensation package, the possibility of renegotiation, inflation's impact, and the automotive industry's economic conditions.
Step-by-step explanation:
The question of whether General Motors can afford to give its employees pay raises this year encompasses several factors, including the employee's total compensation package, the possibility of negotiation, the impact of inflation, and market conditions such as supply and demand for automobiles.
An employee's total compensation package, which may include health care, retirement benefits, and other perks, can sometimes offset lower wages, although this depends on individual or collective preferences. There's also a chance for renegotiation, usually after a certain period such as 6-12 months from the start, which presents an opportunity for wage adjustments.
However, external economic factors like a 5% inflation rise can affect the economic actors differently. For instance, a union member with a Cost of Living Adjustment (COLA) wage contract may be protected against inflation, whereas an individual with cash savings or a fixed pay raise schedule could be negatively impacted.
Finally, the context of industry conditions should be considered. Changing consumer tastes and industry slowdowns, as exemplified by Fiat Chrysler and Ford's production challenges, can impede a company's ability to raise wages. On the other hand, if employers across the board adjust wages to make up for increased Social Security costs or other benefits, this may influence the general wage level within the industry.