Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.
If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?
(This question is from Official Guide. Therefore, because of copyrights, the complete question cannot be copied here. The question can be accessed at GMAT Club)
Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits.
In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.
The statement talks about a particular industry – the metalworking industry – and a particular time – last year.
Productivity per worker in firms with PRP contracts was 13% higher than Productivity per worker in firms without PRP contracts
When you’ve read the passage, do you understand that the second statement state that the productivity was higher BECAUSE of the PRP contracts?
If yes, you have fallen into a classic trap of correlation-causation.
Correlation, in essence, means that two things are happening together.
Causation means that one is the cause of the other.
“Correlation-causation” is commonly used to refer to a jump from correlation to causation. The fact that two things are happening together (correlation) doesn’t necessarily mean that one is the cause of the other.
For example, in our case, the productivity in firms with PRP contracts could be higher for many other reasons and not because of PRP contracts. Right?
It could also be the case that these firms have PRP contracts because they had higher productivity to begin with. Perhaps, PRP contracts are a good way to motivate already productive people. Can’t this be the case?
If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?
What is argued (the point being concluded)?
PRP contracts increase worker productivity.
What is the basis?
The correlation given in the passage. Productivity per worker (in firms with PRP contracts) 13% higher than Productivity per worker (in firms without PRP contracts)
We’re looking for an option that would most seriously weaken arriving at the causation (PRP Contracts -> Increase in worker productivity) based on the correlation.
There are two common ways to weaken correlation-causation arguments:
(A) Incorrect.
This option supports the argument.
If similar results have been found in other industries too, PRP contracts and productivity seem to be connected. It seems as though what happened in the metalworking industry wasn’t just a coincidence.
(B) Incorrect.
This option supports the argument.
Let’s try to understand the statement. It says that other costs (i.e., ALL costs – Labor costs) constitute a bigger proportion of the total cost/unit. Thus, it means that labor costs constitute a smaller proportion of the total cost/unit.
Smaller than what?
Smaller than under non-PRP contracts.
Essentially, the statement compares companies under PRP contracts and other companies.
The basis of the comparison is the proportion that labor costs constitute of the total costs.
For companies under PRP contracts, the labor costs constitute a smaller proportion of the total costs.
One possible reason why labor costs would constitute a smaller proportion in companies with PRP contracts is more worker productivity in those companies. Thus, we have a reason to believe that companies with PRP contracts have more worker productivity in general. (The passage gave us data only about the metalworking industry and last year. This option is not restricted to either the metalworking industry or last year)
Thus, this option supports the idea that PRP contracts increase worker productivity. We are looking for an option that weakens this idea.
(C) Incorrect.
This option has NO IMPACT on the argument.
The option indicates that there are perhaps additional costs associated with introducing PRP contracts. Thereby, the option indicates that the introduction of PRP contracts may not be overall beneficial to the firms.
However, the argument is NOT concerned with the overall benefit of the PRP contracts. The argument is only concerned with whether PRP contracts increase worker productivity.
Whether PRP contracts lead to many other costs has NO RELEVANCE to the argument.
(D) Correct.
This option weakens the argument by suggesting an alternate cause for the effect (increased worker productivity).
The option suggests a great overlap between the firms that modernized their equipment and those that introduced PRP contracts. If there is such overlap, the higher productivity of the firms with PRP contracts could be because of modernized equipment.
Thus, we have a reason to doubt that PRP contracts lead to increased worker productivity.
(E) Incorrect.
This option supports the argument that PRP contracts increase worker productivity.
If the average take-home pay is higher in firms with PRP contracts, we have a reason to believe that PRP contracts have led to higher pay for the workers. If so, we have a reason to believe that PRP contracts increase worker productivity.
Thus, this option supports the argument. However, we’re looking for an option that weakens the argument.
—
I believe some people mark this option, thinking the following:
This option indicates that the firms with PRP contracts pay more to the workers than firms with other contracts.
Thus, PRP contracts do not save money for the firms.
Therefore, this option weakens the argument.
—
These people have forgotten that the conclusion was NOT that the PRP contracts save money for the firms; the conclusion was that PRP contracts lead to increased worker productivity.
Question Delta Products Inc. has recently switched at least partly from older technologies using fossil fuels to new technologies powered by electricity. The question has
Question Politician: Hybrid cars use significantly less fuel per kilometer than nonhybrids. And fuel produces air pollution, which contributes to a number of environmental problems.
Question Psychologist: In a survey, several hundred volunteers rated their own levels of self-control and their overall life satisfaction. The volunteers who rated themselves as
Learn GMAT the right way – through common sense and logic. There’s no shortcut to a well-deserved success!
© 2021 All rights Reserved.