The difference in average annual income in favor of employees who have

Question

The difference in average annual income in favor of employees who have college degrees, compared with those who do not have such degrees, doubled between 1980 and 1990. Some analysts have hypothesized that increased competition between employers for employees with college degrees drove up income for such employees.

Which of the following, if true, most seriously undermines the explanation described above?

(A) During the 1980s a growing percentage of college graduates, unable to find jobs requiring a college degree, took unskilled jobs.
(B) The average age of all employees increased slightly during the 1980s.
(C) The unemployment rate changed very little throughout the 1980s.
(D) From 1980 to 1990 the difference in average income between employees with advanced degrees and those with bachelor’s degrees also increased.
(E) During the 1980s there were some employees with no college degree who earned incomes comparable to the top incomes earned by employees with a college degree.

OG 2017 New Question

Wage Gap

Step 1: Identify the Question

The word undermines in the question stem indicates that this is a  Weaken the Argument  question.

Step 2: Deconstruct the Argument

Income gap between college degree & no degree:

Gap doubled from 1980 to 1990

Step 3: Pause and State the Goal

On Weaken questions, the right answer is an additional fact that, when added to the argument, will make the conclusion less likely to be correct. In this case, the correct answer will suggest that employer competition did not cause the wage gap to grow. It will accomplish this by either showing that employer competition is a poor explanation, or showing that some other factor is more likely to have caused the change.

Step 4: Work from Wrong to Right

(A) CORRECT . This answer choice shows that employer competition is a poor explanation for the wage gap increase. If a growing percentage of college graduates could not find jobs that required their degrees, there probably were few such jobs available. Since they had few appropriate job openings, employers likely were not competing for such employees (i.e. there were more than enough people with college degrees to fill such openings).

(B) There is no necessary relationship between age and education level or income, and the argument does not provide any data that relates these factors. So, information about employee age does not affect a conclusion that deals only with employee education levels and income.

(C) The conclusion refers specifically to college-educated employees. Without knowing whether the unemployment rate for this specific group of employees remained constant, no conclusions can be drawn from this answer choice.

(D) The conclusion refers specifically to employees with college degrees, and does not make a distinction between employees with advanced degrees and employees with bachelor’s degrees. Also, knowing that there is a wage gap between two groups doesn’t help to explain why there is a wage gap between two other groups.

(E) This answer choice appears to suggest that the wage gap is not as large as one might believe. However, the argument already states that the wage gap doubled between 1980 and 1990. The conclusion deals with the cause of that increase. In order to weaken the argument, an answer choice should address possible causes of the wage gap increase, not the size or existence of that gap.

sayantanc2k · Accepted Answer

Looking at your point 3, I presume that you have some Economics background. Therefore I shall try to explain to you on the same line:

1. It actually does not matter how much growth the percentage of college graduates have. In fact it does not matter, whether the percentage is at all growing or decreasing - the point in option A is that there is an excess of supply of labour (college graduates) and the demand is lower than supply. This excess supply should pull the wages down.

2. Same argument as 1 above.

3. You have basically reversed the cause and effect chain here. Yes, you are right that if the wage increases (because of drop in supply of labour or inflation or advance in technology whatsoever), the supply of labour will increase; an equilibrium will be attained at a point towards the right of the price (wage)-quantity(labour) curve. However the reverse is not correct - for some reason, if the number of labours increase (immigrants, population boom etc.), then the wages will be pulled down - this is where you have made a mistake by equating  Increased wages = Increased supply of labor  : Increased supply of labour DOES NOT increase wage, but pulls it down.

4. Why would you compare unskilled job of one particular industry to to skilled job of another industry ? It is definitely not illogical to assume that an unskilled job has a lower wage than a skilled job.

Why A is correct? The passage claims that the difference in wages is caused by an excess demand for labour ( D-S is positive), driving the wage up ( make it clear - this is exactly in line economic theory!!)
Option A states that there is an excess in labour i.e. S-D is positive, hence the wages should have been pulled down, not up ( again exactly in line with economic theory !!) - therefore there must be some other reason for the difference in wages. Hence A weakens the argument.

LogicGuru1 · Answer

The difference in average annual income in favor of employees who have college degrees, compared with those who do not have such degrees, doubled between 1980 and 1990. Some analysts have hypothesized that increased competition between employers for employees with college degrees drove up income for such employees.

Which of the following, if true, most seriously undermines the explanation described above?

ANSWER IS A
  In 1980 salary per month 
No degree employee:- 100 $
Degree employee:- 110 $
Difference = 10 $
 
  In 1990 salary per month 
No degree employee = 200 $
Degree employee= 516 $
Difference=316 $

Main reason for the growing difference in salary of degree and no degree workers; the degree holders of 1980 who sold themselves short and started working at the same pay as the non degree holders.
Result:- Very little salary difference between degree and no degree employee

Fast Forward to 1990
Degree holder took only high paying jobs whereas no degree took the same worker level low paying jobs.
Result :- The salary difference between degree and non degree worker increased.

Another reason :- 1980 workers, owing to their college degrees , later got promoted during a decade and thus become managers, supervisors and other high paying post, where as no degree stayed at the same worker level. 
RESULT:- In 1990 , the degree employee who was once a low level worker is now a manager and his salary his higher than no degree worker. Therefore the difference.
 
ANSWER A.

A) During the 1980s a growing percentage of college graduates, unable to find jobs requiring a college degree, took unskilled jobs. 
B) The average age of all employees increased slightly during the 1980s. 
C) The unemployment rate changed very little throughout the 1980s.
D) From 1980 to 1990 the difference in average income between employees with advanced degrees and those with bachelor’s degrees also increased. 
E) During the 1980s there were some employees with no college degree who earned incomes comparable to the top incomes earned by employees with a college degree.

KarishmaB · Answer

The difference in average annual income between college degrees vs no college degrees doubled between 1980 and 1990.

Hypothesis: Increased competition between employers for employees with college degrees drove up income for such employees.

The increasing of the difference could be because of any factor. The hypothesis is that it is because of scarcity of college grads. We need to weaken this.

Option (A) says college grads were available in abundance, so much so that they had to take unskilled jobs. Then, college grads were not scarce. Correct. 
All other options are completely irrelevant.

Answer (A)

egmat · Answer

Understanding the Passage

The difference in average annual income in favor of employees who have college degrees, compared with those who do not have such degrees, doubled between 1980 and 1990.

The average annual income of employees who have college degrees is higher than those without degrees.
The difference in the average annual incomes of the two groups doubled between 1980 and 1990.

Some analysts have hypothesized that increased competition between employers for employees with college degrees drove up income for such employees

This has led the analysts to believe the following:
The employers were competing among themselves to hire employees with college degrees and this led to an increase in the income of such employees.

Conclusion
 
The average annual income of employees with college degrees has gone up because of increased competition between employers for such employees.

Pre-thinking

Weaken Framework

Now per our understanding of the passage, let’s first write down the weaken framework:

What new information will help us believe less in the causality of the argument

Cause:  Increased competition between employers for employees with college degrees

Effect:  The average annual income of employees with college degrees has gone up

Given that

There is a difference between the average annual income of employees with 
 college degrees and that of employees without college degrees

Between 1980 and 1990, this difference doubled in favor of employees with college degrees.
Thought process

Understand the author’s line of reasoning
 
The author starts with the understanding that there existed a difference in the average income of the employees who held college degrees and those who did not.

The ones with college degrees had a higher average annual income than the ones without.

This gap in income doubled between 1980 and 1990.

As per the author, this doubling implies that the ones with college degrees were earning a higher average annual income than the ones without the college degrees.

And this higher income was being offered to the college degree holders by employers who were competing with one another to employ college degree holders as employees.

Weakener1

The argument seems to be working on the idea that there was a shortage of college degree holders and therefore all of them were being sought after by employers who were ready to pay high salaries to get them. It’s like saying the demand for college degree holders was higher than the supply of the same

So, if an option says that there were a significant number of college degree holders who were unemployed between 1980 and 1990, then the explanation behind the doubling of the difference will be weakened.

It will show that the doubling was not because of employers competing within themselves as there was no shortage of employable college degree holders.

Weakener 2

The difference in the average annual income of college degree holders could also have gone up if a significant number of the college degree holders were employed in jobs that did not require degrees.

That would reduce the average annual income of the non-college degree holders group.

And at the same time raise the average annual income of the college degree holders group.

And that could explain the doubling in the difference in the average annual incomes.

So, if an option statement provided information to the above effect, it could weaken the argument by providing an alternate cause behind the effect.

Answer Choice Analysis

Option A  - This option is in line with our weakener 2. Thus, this is the correct choice.  CORRECT

Option B  -The age has nothing to do with an increase in average income. Thus, this is not the correct choice.  INCORRECT

Option C  - If the unemployment rate was stable, it means the demand-supply situation of labour for particular jobs did not undergo much change. Therefore, this option fails to explain the widening gap in the incomes of the two groups. INCORRECT

Option D  - This differentiation is not the point of the conclusion. Making this further distinction among college degree holders serves no purpose. INCORRECT

Option E  - Since, the passage is about average annual incomes, the “some employees” does not create a clear impact on the conclusion. “Some” could be as little as “at least one” and as big as “all”. INCORRECT

Abhishek009 · Answer

Diff in avg income of degree holders and non degree holder - Doubled from 80's to 90's
Incr comp amongst employers was responsible for the increase

(A) States college students in 90's were unable to find jobs took up unskilled jobs ( which they didn't took earlier in the 80's) thus their avg salary decreased ; widening the difference in the average income in the 90's...

HiLine · Answer

Wow A is a perfect answer choice. Not only does it attack the claim that employers competed more for college graduates, but it also points out that the competition actually could have actually lead to a lower income gap.

Konstantin1983 · Answer

At first i couldn't understand why A is correct. But now i do. Looks like this question is about two process. First is when college graduates couldn't find a job that required college degree and hence took unskilled positions. This process should narrow the gap between incomes of two groups. That is why i decided that this choice is wrong. But looks like at the same time this process lead to shortage of graduates with college degrees (since only few were able to find skilled jobs) and to rise of salaries of college graduates thus widening salary gap again.

kconn · Answer

A) is the gmat answer. Here is why it is wrong.

The hypothesis is that increased competition for employees drove up income. Ie, At its essence that a supply demand in imbalance vis a vis roles for college graduates vs supply of graduates caused wages to rise and that this rise continued over the 1980s.

A is wrong for the following reasons

1)  First of all "a growing %". .. if this is a growing % from 0 to 2% then it would have had 0 impact on the overall average. Its bizarre that the OG writers catch themselves out on their own logic test.
2)  Unable to find jobs requiring a college degree  - Lazily one could infer that this is supportive for the idea that there was not many jobs available - But really only refers to the experience of the "growing %" which as above could have been tiny. 
3) Furthermore - Increased wages = Increased supply of labor. This can properly be inferred by the construction of the hypothesis. Therefore it is in fact logically CONSISTENT that a growing number graduates wouldnt have found jobs if wages were rising as the overall supply would increase.
4) Says nothing about the wage level of the jobs that the graduates took - an unskilled job in a boom industry might have wages significantly higher than skilled jobs in stable industrys

There really is no right answer here - D is possible as it shows an alternitive explanation - that in general, an increased stratification of wages occured relative to level of skill as opposed to driven by supply and demand and C) is certainly valid as a stable U/E implies that there were no specific shortages of employees available.

Either are better than A

Come on OG - sort it out!

The difference in average annual income in favor of employees who have college degrees, compared with those who do not have such degrees, doubled between 1980 and 1990. Some analysts have hypothesized that increased competition between employers for employees with college degrees drove up income for such employees.

Which of the following, if true, most seriously undermines the explanation described above?

A) During the 1980s a growing percentage of college graduates, unable to find jobs requiring a college degree, took unskilled jobs. 
B) The average age of all employees increased slightly during the 1980s. 
C) The unemployment rate changed very little throughout the 1980s.
D) From 1980 to 1990 the difference in average income between employees with advanced degrees and those with bachelor’s degrees also increased. 
E) During the 1980s there were some employees with no college degree who earned incomes comparable to the top incomes earned by employees with a college degree.

AlexGenkins1234 · Answer

The conclusion is based on the assumption that there there was more demand than supply, otherwise the companies would not have needed to compete over the employees.

Answer choice A clearly shows that there was no demand, hence the conclusion is weakened.

kconn · Answer

Thank you for taking the time to respond to quite an incoherant rant... yes I do have an economics background but this really wasnt helping me at the start of my gmat study (which was when I posted this) and clearly A is the GMAT answer.

From a purely technical perspective and what I was trying (and failing) to explain was the following... and to be completely clear, this is not to argue that I was correct.

There are indeed situations whereby incresed competition leads to increased wages and decreased job opportunities. If for example productivity per quality of graduate is non linear and rises => (employers' utility curve from a single college graduate moves higher) this leads to the value of one graduate moving up but absolute demand of graduates moving down. Wages increase per graduate for the smaller pool (wages = cost/unit of productivity) but there is increased competition for the best graduates.

Indeed, this dynamic can often cause a situation whereby people are pulled into an industry due to the wages and if one was to consider the barriers to entry to get a degree are less than to get a job in that industry this would have the necessary effect of increasing average supply over time. The rate of change of wage increases would slow yes and maybe revert to the level of inflation but framed in the context of a ten year period, this is sufficient time for both a doubling of wages and gradual increase in difficulty to find jobs to occur.

Clearly though there are too many assumptions, external facts and downright jumps in logic for this to be useful for the GMAT but thought I would try to explain what I was getting at in my rant. Thanks again

14razy · Answer

I find that sometimes OG 2017 is not trying to give clear and sensible explanations for answers to CR. I post a question here and was hoping someone please clarity the working of the solution.

The difference in average annual income in favor of employees who have college degrees, compared with those who do not have such degrees, doubled between 1980 and 1990. Some analysts have hypothesized that increased competition between employers for employees with college degrees drove up income for such employees.

Which of the following, if true, most seriously undermines the explanations described above?

(A) During the 1980s a growing percentage of college graduates, unable to find jobs requiring a college degree, took unskilled jobs.

(A) is the right answer, and I got it right. But I wanna know why? I have learned from Kaplan that I want to notice the shift of topic from evidence to conclusion as the shift is always where the assumption lies. In this particular question, the evidence is talking about degrees and income, whereas the conclusion is talking about companies, competition and income. So one of the assumptions of the argument has to do with how degrees relates to competition. However, I could go no further. With this very vague piece of clue, I thought A was right. Could anyone please further explain why A is correct or maybe come up with a more solid way to point to the right answer? Btw, I am also very keen to learn a generic methodology of CR. I have read Powerscore a lot of people around here highly recommend. Well, I was not very impressed. The book is kind of like manhattan SC, lengthy but does not seem to come up with a compact and easy to follow method. Note that I'm by no means saying those two books aren't good! They're really good, but I just wish the authors synthesized all the methods proposed in the books.

Thank you very much!

TheMechanic · Answer

Here is what my take is:

The conclusion states that there was  increased competition  between employers to get the right candidate with the college degree for the job.  This increased competition led to differences in the pay scale.   Option A  states that there weren't enough jobs for the college graduates. This implies that    there was no competition between employers for the graduates   . Hence there must have been   other reasons   why the pay scale widened between the two groups here. This option  satisfies  the weakening conditions.

As a stretch, we can go on to say that the pay scale gap may have been lessened as a result of this shortage of jobs. Because ideally when there are fewer jobs and more applicants, the pay scale is generally lower. Demand (which is less i.e. less jobs) drives the Supply (more graduates available). But this stretch thought process actually attacks the premise. Hence we should not go here.

Nonktp · Answer

GMATNinja   EMPOWERgmatVerbal  Could you please help explain why (A) is correct whereas (B) is incorrect?

GMATNinja · Answer

The key part of the passage that helps answer this question is the hypothesis that  increased competition between employers ... drove up  income for employees with college degrees. In other words, employers were so keen to give jobs to employees with college degrees that they had to offer higher wages to get people with college degrees to work for them instead of another company.

(B) tells us:
 
The argument is about why  college graduates  wages rose faster than those of non-graduates. (B) gives us information about  all  employees, but doesn't give us any insight into why college graduates' wages have risen so much faster than the wages of non-graduates.

From this, we can eliminate (B).

Let's take a look at (A):
 
If there was a growing percentage of college graduates unable to find jobs that required their degree, why did the employers need to compete for their services? If there was less need for employers to compete to employ college graduates then there was no need for them to offer higher wages.

This undermines the explanation given in the passage for the growing wage gap between employees with college degrees and those without. (A) is the answer.

I hope that helps!

egmat · Answer

Understanding the Passage

The difference in average annual income in favor of employees who have college degrees, compared with those who do not have such degrees, doubled between 1980 and 1990.

The average annual income of employees who have college degrees is higher than those without degrees.

The difference in the average annual incomes of the two groups doubled between 1980 and 1990.

Some analysts have hypothesized that increased competition between employers for employees with college degrees drove up income for such employees

As a result, the analysts believe the following:

The employers were competing among themselves to hire employees with college degrees and this led to an increase in the income of such employees.

Conclusion

The average annual income of employees with college degrees has gone up because of increased competition between employers for such employees.

Pre-thinking

What new information will help us believe less in the causality of the argument

Cause:  Increased competition between employers for employees with college degrees

Effect:  The average annual income of employees with college degrees has gone up

Given that

1. There is a difference between the average annual income of employees with college degrees and that of employees without college degrees

2. Between 1980 and 1990, this difference doubled in favor of employees with college degrees.

Thought process

Let's understand the author's reasoning.

The author tells us that there existed a difference in the average income of the employees who held college degrees and those who did not.

The employees with college degrees had a higher average annual income than the employees without college degrees.

And this gap in income doubled between 1980 and 1990.

According to the author, this doubling implies that the employees with college degrees  were earning a higher average annual income  than the employees without the college degrees.

And this higher income was being offered to the college degree holders by employers who were competing with one another to employ college degree holders as employees.

Weakener

The difference in the average annual income of college degree holders could also have gone up if a significant number of the college degree holders were employed in jobs that did not require degrees.

That would reduce the average annual income of the non-college degree holders group.

And at the same time raise the average annual income of the college degree holders group.

And that could explain the doubling in the difference in the average annual incomes.

So, if an option statement provided information to the above effect, it could weaken the argument by providing an alternate cause behind the effect.

Option A does precisely that

jabhatta2 · Answer

VeritasKarishma   GMATNinja  - During my pre-thinking, I actually listed this as a following weakener

Perhaps the reason for the difference in the wage gap is, income for people with NO college degrees have DECREASED instead

Would this be example of another weaken-er or would this be outside the scope of the conclusion ?

Conclusion seems to focus on causality with regards to incomes INCREASING for folks with college degrees ONLY and we need to stick to this group only

Any talk about incomes decreasing for people with NO college degrees would be out of scope

Is my understanding correct ?

KarishmaB · Answer

Yes, this would be a weakener. If incomes of people with no college degrees have decreased, that could be the reason for the increased difference too.

AnishPassi · Answer

The Story

The difference in average annual income in favor of employees who have college degrees, compared with those who do not have such degrees, doubled between 1980 and 1990.

The statement compares incomes of degree-holders and non-degree holders. We learn that the difference in the average income of the two groups has doubled.

What difference is being talked about?

The difference between: 
1. Average salary of degree-holders
2. Average salary of non-degree-holders

This difference doubled over 10 years.

So maybe: 
 degree-holders have started earning more while the other group’s income remained the same, 
 non-degree-holders have started earning less while the other group’s income remained the same, or  
 One group’s income has gone up a bit and the other’s has gone down a bit

Some analysts have hypothesized that increased competition between employers for employees with college degrees drove up income for such employees.  
Hypothesis by some analysts: increased competition for degree-holders drove up their income.
↑competition → ↑income
 (The analysts assume that the difference doubled because of a rise in income of degree-holders, and they have come up with a reason for the income increase - increased competition.)

Question Stem

Which of the following, if true, most seriously undermines the explanation described above?
 
The difference between the average salaries has doubled.

What’s the explanation?

↑Competition for degree-holders → ↑Income of degree-holders → ↑Difference in annual income of degree-holders and non-degree-holders

What would undermine this explanation?

1. The correct answer could attack either of the links, by indicating that:
 a. the income of degree-holders did not go up because of increased competition, or that
b. the income of degree-holders did not go up

Answer Choice Analysis

(A) During the 1980s a growing percentage of college graduates, unable to find jobs requiring a college degree, took unskilled jobs.   
  Correct.   
If in the 80’s a growing percentage of graduates were unable to find jobs requiring a college degree and could only find unskilled jobs, then, it appears, the competition for graduates would not have increased. Since even non-graduates could take unskilled jobs, the analysts’ hypothesis that  salaries for graduates would have gone up because of increased competition  for them doesn’t make sense.

Are you wondering what if these unskilled jobs paid more to degree holders?
That is possible. But these are unskilled jobs, so I’m thinking that probably the pay would be the same.
Nevertheless, even if this possibility exists, the answer choice does undermine the explanation. The correct answer need not destroy the explanation.

Some people eliminate answer choice A after deciding that it does not present an alternative explanation. However, such reasoning is incomplete. While the answer choice doesn’t provide an alternative reason, it does reduce our belief in the current explanation. And that’s all we are looking for.

(B) The average age of all employees increased slightly during the 1980s.  
  Incorrect.   
The overall average age of employees increased – across graduate and non-graduate employees. This option does not differentiate between graduates and non-graduates. No impact.

(C) The unemployment rate changed very little throughout the 1980s.
    Incorrect.   
Statement: The level of employment pretty much remained constant. 
This answer choice, just like option B, does not differentiate between graduates and non-graduates. This option does not lead me to believe more or less in the increased competition hypothesis. No impact.

(D) From 1980 to 1990 the difference in average income between employees with advanced degrees and those with bachelor’s degrees also increased.  
  Incorrect.   
Statement: The difference in average income between advanced degree-holders and bachelor’s degree-holders also increased.

In whose favor did the difference increase?

Well, even if we take this option to indicate that either bachelor’s degree-holders or advanced degree-holders had started earning more, what we are after are the  reasons  behind the increase.
This answer choice actually strengthens the given reasoning by indicating that one segment within the degree-holders had started earning more than the other. So perhaps the difference between graduates and non-graduates did not increase because of the non-graduates’ income going down.

(E) During the 1980s there were some employees with no college degree who earned incomes comparable to the top incomes earned by employees with a college degree.
   Incorrect.   
Statement: At least one non-graduate earned an income close to the top incomes earned by graduates.

This answer choice is the most commonly selected wrong answer.

In order to understand why this answer choice is incorrect, first let’s replace the word ‘some’ with ‘many’.

(E’) During the 1980s there were MANY employees with no college degree who earned incomes comparable to the top incomes earned by employees with a college degree.

Would this modified statement undermine the explanation?

Remember, the explanation we need to undermine is  that the increased competition  for graduates drove up their income and that led to the  increased difference  between the average salaries.

Our job is not to question whether the difference between the average salaries did actually double or not.

The difference did double.

Our job is to question the given reason behind it.

After reading this statement, I am simply more confused about how the difference between graduates’ and non-graduates’ average salaries doubled.
Through this answer choice I do not learn anything new about what might or might not have caused the difference to double.

The answer choice is wrong even if we replace the word ‘many’ back with ‘some’. The same reasoning still applies. We have to undermine the explanation. We do not have to undermine the fact that the difference in average annual incomes doubled.

Additional Notes

1. The correct answer choice in this question highlights a very important distinction:

In order to undermine the current explanation,

the correct answer could present an alternative explanation, 
 or indicate that at least the given explanation would not have been the case.

Option A does the latter. I find some people eliminate this answer choice after simply deciding that it does not present an alternative explanation. However, such reasoning is incomplete. It misses the second part that the statement directly reduces my belief in the current explanation.

2. Between 1980 and 1990 = During the 1980s

woohoo921 · Answer

GMATNinja 
This is very helpful, thank you! To clarify, can you make the argument that Choice A is not airtight? In other words, the growing percentage of college graduates could have still been a very small percentage relative to the overall pool of college graduates who command higher paying jobs. Nevertheless, this is the best answer because it weakens the conclusion to an extent, correct?

The difference in average annual income in favor of employees who have

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GMAT Critical Reasoning (CR) Questions

The difference in average annual income in favor of employees who have

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