Firms adopting profit-related-pay (PRP) contracts pay wages at level

what actually we need to search for in choosing a correct answer for weaken question...
Please can u give me some explanation on this

question is about productivity of worker.
C doesnot talk about productivity anymore
hencce C is not the the answer for sure

Hey guys, just wanted to clarify something that might be useful to some of you. Hopefully
So why is answer B wrong. In B it is taking about total costs. Remember we are interested in productivity
Productivity = Output/Total Cost. Therefore it is not comparable unless we are given some form of output to imply this.
Hence the correct answer is (D) because it is an alternate cause of effect weakening the statement, as many of you correctly pointed out.

Keep that in mind, and good luck in your prep!
Cheers
J

Conclusion: PRP contracts increase worker productivity.
Let's weaken it!

If the results have been found similar, than the conclusion is true. These contracts do increase worker productivity. This option is a strengthener. Eliminate A

This option shows no relation between PRP contracts and worker productivity. Eliminate B

This is a bit tempting but not hitting the right spot of weakening the conclusion. The negotiation of PRP contracts is complex but does that really tells us anything about worker productivity? No! Eliminate C

If modernization of the production equipment and PRP contracts happened at the same time, then the productivity increase is because of the use of modern equipment by the workers. Now, this is a weakener. Keep D

With PRP contracts in place, the pay of workers increased. This may be because of an increase in profits. But this shows no relation to worker's productivity. Eliminate E

Well, D is our winner!

Conclusion: PRP contract increase productivity.
Weaken: PRP contract doesn't increase productivity.

(D) Many firms in the metalworking industry have modernized production equipment in the last five years,
and most of these introduced PRP contracts at the same time.
CORRECT WEAKENING STATEMENT as it introduces another POV as to why there was an increase in productivity.

AndrewN

Hello Sir,

I managed to get to B and D by POE. Eventually I picked B as my reasoning was : I thought we had to assume that adding new equipment will result a higher productivity , based on this reasoning I eliminated D and picked B. May I ask your expert opinion on this ?

Thank you

Hello, JadAsmar. Pardon the delayed response, but this has been an unusually busy day. To answer your question, remember that CR often rewards linear thinking on strengthen/weaken questions, so your aim should be to stick as closely as possible to the exact argument given. Here, we see that argument in the question stem itself:

If the argument centers on an increase in worker productivity through implementing PRP contracts, then you want to find an answer choice that would reasonably cast doubt on such a causal relationship.

Choice (B) is a distraction that focuses on the total cost of each unit of output. Cost is not the same as productivity, so we cannot say that this consideration would weaken the given argument. Sure, a unit of output could tie into productivity, but the cost of that output is a separate and unrelated concern.

Choice (D) does indeed require the test-taker to assume that modernized production equipment would increase productivity, but this is a reasonable association. (Why else would firms upgrade equipment? Certainly not for aesthetic purposes.) Furthermore, we have a reason to doubt that it was the PRP contracts that led to increased productivity per worker. Maybe the contracts did produce such a result, but since the machinery upgrades occurred at the same time, we have no way to tease apart one potential contributing factor from another. Hence, the argument that PRP contracts (necessarily) increase worker productivity may be wayward, and (D) looks like a strong answer.

I hope you better understand the strengthen/weaken task and this particular question now. Thank you for thinking to ask me, and good luck with your studies.

- Andrew

KarishmaB GMATNinja
Why E is incorrect?

Conclusion: Cause (PRP Contracts) >> Effect (increase in productivity) >> Higher wages

(E) In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.
If pay is higher, may be motivation to increase productivity is to get higher take home pay. So the reason for increased productivity isn't PRP contracts

Thanks!

Take another look at the conclusion exactly as written (in this case, located in the question itself): "PRP contracts increase worker productivity." Notice that this does NOT include that last bit that you've mentioned -- that higher wages are caused by the increase in productivity.

So, the author doesn't care exactly HOW the PRP contracts increase productivity -- he/she just argues that they DO increase productivity. For example, maybe under PRP contracts, workers get to wear pajamas to work and that makes them more productive. From the author's perspective, that's great! PRP contracts are still the underlying cause for the increase in productivity. An answer choice explaining this pajama element would strengthen the author's conclusion.

(A) gives us another example of some component of PRP contracts that might increase productivity. These contracts give workers higher take home pay! From the author's perspective, this is awesome -- it provides a reason for why PRP contracts might increase worker productivity, which strengthens the argument that PRP contracts DO increase worker productivity.

Compare that with (D):
(D) tells us about a factor that has nothing to do with PRP contracts, but that provides an alternate reason for increased productivity. Firms happened to do two things at the same time -- they implemented PRP contracts, and also modernized their production equipment.

So, which of these two factors actually caused the increase in productivity? There's no way of knowing. This casts doubt on the argument that the PRP contracts caused the increase. (D) is the correct answer.

I hope that helps!

Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits.

1. PRP contracts – Profit-related-pay contracts
2. There are firms that adopt these contracts.
3. These firms pay wages that vary with the firm’s profits (This makes sense with the name of the contracts: “profit-related-pay”)
4. In other words, when profits are higher, employees’ wages are higher, and when profits are lower, employees’ wages are lower.

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

Some thoughts

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.

Predicting Possible Answers

There are two common ways to weaken correlation-causation arguments:

1. By indicating that a third factor is the cause of the effect (Increase in worker productivity)
2. By indicating reverse-causality, i.e., by suggesting that the companies implemented PRP contracts because they had more worker productivity. (Perhaps the management wanted to reward their employees for working with high efficiency and give them a bigger share of the profits.) So, more worker productivity -> PRP contracts in those firms; not the other way around.

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

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) Under PRP contracts 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.

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) Because introducing PRP contracts greatly changes individual workers’ relationships to the firm, negotiating the introduction of PRP contracts is complex and time consuming.

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

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) In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.
Show Answer

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.

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Hi GMATNinja,

I wanted to make sure I eliminated option C by the right reasoning. Could you help me with that?
My evaluation was - Option C tells us about negotiation when the PRP contract is introduced, however, that negotiation should not affect the productivity of the worker because it is the initial step before the PRP contract is finalized.
One analogy I think of - is the government brings in any fiscal policy and it took so much time to get implemented, we can't say that that time led to a decline in results for the economy, comments about results can only be made once the policy is implemented and how things go post that.

Please let me know if my thinking was right to eliminate option C. Happy to know if anything was wrong.

­That sounds good! All we care about here is whether PRP contracts increase worker productivity, not the time and effort that goes into negotiating those contracts.

In other words, PRP contracts can increase worker productivity regardless of the complexity or time that goes into those contracts, so (C) is irrelevant.­

 
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GMATNinja KarishmaB AndrewN Can you please help me with where am I going wrong?

Conclusion : PRP increases productivity.

E. Firms in metal industry with PRP contracts pay 15% higher wages. - Can't this mean that maybe higher wages is the reason for higher productivity rather than PRP contracts in these firms? If that's the case - this weakens since we have another reason for productivity going up.

Thanks in advance!
 

­We attempted to address this point in an earlier post: https://gmatclub.com/forum/firms-adopting-profit-related-pay-prp-contracts-pay-wages-at-level-114923.html#p2992435. Take a look, and let us know if you still have questions!