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# Corporates espousing “dividend-related-reward” (DRR) contracts pay wag

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Director
Joined: 09 Mar 2018
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Corporates espousing “dividend-related-reward” (DRR) contracts pay wag  [#permalink]

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Updated on: 19 Jan 2019, 01:23
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Question Stats:

74% (01:58) correct 26% (02:19) wrong based on 140 sessions

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Corporates espousing “dividend-related-reward” (DRR) contracts pay wages at levels that vary with the firm’s dividends. In the metalworking industry last year, firms with DRR undertaking in place showed productivity per worker on average 18 percent higher than that of their competitors who used more traditional undertakings.

If, on the basis of the evidence above, it is argued that DRR undertakings increase worker productivity, which of the following, if true, would most seriously weaken that argument?

A) Results similar to those cited for the metalworking industry have been found in other industries where DRR undertakings are used.

B) Under DRR undertakings costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.

C) Because introducing DRR undertakings greatly changes individual workers’ relationships to the firm, negotiating the introduction of DRR undertakings is complex and time consuming

D) Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced DRR undertakings at the same time.

E) In firms in the metalworking industry where DRR undertakings are in place, the average take-home salary is 15 percent higher than it is in those firms where workers have more traditional undertakings.

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Originally posted by KanishkM on 18 Jan 2019, 23:13.
Last edited by Bunuel on 19 Jan 2019, 01:23, edited 1 time in total.
Renamed the topic and edited the question.
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Re: Corporates espousing “dividend-related-reward” (DRR) contracts pay wag  [#permalink]

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21 Feb 2019, 06:35
KanishkM wrote:
Corporates espousing “dividend-related-reward” (DRR) contracts pay wages at levels that vary with the firm’s dividends. In the metalworking industry last year, firms with DRR undertaking in place showed productivity per worker on average 18 percent higher than that of their competitors who used more traditional undertakings.

If, on the basis of the evidence above, it is argued that DRR undertakings increase worker productivity, which of the following, if true, would most seriously weaken that argument?

A) Results similar to those cited for the metalworking industry have been found in other industries where DRR undertakings are used.

B) Under DRR undertakings costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.

C) Because introducing DRR undertakings greatly changes individual workers’ relationships to the firm, negotiating the introduction of DRR undertakings is complex and time consuming

D) Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced DRR undertakings at the same time.

E) In firms in the metalworking industry where DRR undertakings are in place, the average take-home salary is 15 percent higher than it is in those firms where workers have more traditional undertakings.

Identify the Question: Weaken

Deconstruct the Argument (in your own words)
[*] Premise 1: DDR contract usage mean wages depend on firm dividends.
[*] Premise 2: In metalworking industry, DDR contract increase productivity more than non-DDR contract competitors.
[*] Conclusion (in question stem): DDR contract increases productivity.

Looking for something that tells us that productivity increase is not caused by the contract and its effect on wages. Maybe better working conditions? Better machinery?

Quote:
A) Results similar to those cited for the metalworking industry have been found in other industries where DRR undertakings are used.

Results found elsewhere...this strengthens the argument.

Quote:
B) Under DRR undertakings costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.

I had to read this twice to understand it. But it says that DDR contracts add to more cost per output than anything. By economics (from my memory), productivity is total output/total input. Here, we're saying that total input increased so basically productivity declined because of the cost...? This sounds like a weaken but it doesn't explain worker productivity and more so talks about general firm productivity (costing them more money to add this contract). No....not a fan right now. Moving on, but I kept it just in case I read it wrong.

Quote:
C) Because introducing DRR undertakings greatly changes individual workers’ relationships to the firm, negotiating the introduction of DRR undertakings is complex and time consuming

This has no effect on the argument. OK, so it changes the relationships....and it's time-consuming. This is just telling us it's hard to negotiate, not how it increases productivity!

Quote:
D) Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced DRR undertakings at the same time.

Hey, this is our pre-phrased answer!
Let's keep going to check (E) to be more certain.

Quote:
E) In firms in the metalworking industry where DRR undertakings are in place, the average take-home salary is 15 percent higher than it is in those firms where workers have more traditional undertakings.

This kind of repeats the premise, telling us that "(DRR) contracts pay wages at levels that vary with the firm’s dividends" and therefore, wages do effect productivity. Does not weaken. If anything it strengthens.
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Re: Corporates espousing “dividend-related-reward” (DRR) contracts pay wag  [#permalink]

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23 Feb 2019, 03:45
this basically describe a Cause and effect relation .

Cause DRR --> Effect Increased productivity.

So to weaken this , we need to find alternate cause which gives the same output as DRR

here is my understanding ,
So.

1. this is more kind of strengthening the conclusion as giving more examples from other industries ( which we do not know ),. So this is out
2. Cost segregation does not explain the increase in productivity. This is not our answer . This is out
3. Out of scope, we are not concerned how this is negotiated
4. this gives another reason for productivity increase , should be our answer
5. Irrelevant , take home salary may be high but it does not explain why the productivity is high

IMO D
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Re: Corporates espousing “dividend-related-reward” (DRR) contracts pay wag   [#permalink] 23 Feb 2019, 03:45
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