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# Small-business groups are lobbying to defeat proposed

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Director
Joined: 29 Oct 2004
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Updated on: 14 Dec 2017, 04:39
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77% (01:13) correct 23% (01:29) wrong based on 358 sessions

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Small-business groups are lobbying to defeat proposed federal legislation that would substantially raise the federal minimum wage. This opposition is surprising since the legislation they oppose would, for the first time, exempt all small businesses from paying any minimum wage.
Which of the following, if true, would best explain the opposition of small-business groups to the proposed legislation?
(A) Under the current federal minimum-wage law, most small businesses are required to pay no less than the minimum wage to their employees.
(B) In order to attract workers, small companies must match the wages offered by their larger competitors, and these competitors would not be exempt under the proposed laws.
(C) The exact number of companies that are currently required to pay no less than the minimum wage but that would be exempt under the proposed laws is unknown.
(D) Some states have set their own minimum wages---in some cases, quite a bit above the level of the minimum wage mandated by current federal law---for certain key industries.
(E) Service companies make up the majority of small businesses and they generally employ more employees per dollar of revenues than do retail or manufacturing businesses.

[Reveal] Spoiler:
I wonder why (A) is wrong?
[Reveal] Spoiler: OA

Originally posted by qhoc0010 on 21 Dec 2004, 18:33.
Last edited by adkikani on 14 Dec 2017, 04:39, edited 2 times in total.
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21 Dec 2004, 22:54
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This is an Explain the Paradox question. In short: small businesses don't want the new minimum wage law, even though it looks like it will benefit small businesses because they won't have to pay the minimum wage. What gives?

I'm pretty sure that the correct answer is B), because B) states that small businesses will have to pay the same wages as large businesses to compete for employees so the fact that they can legally get away with paying less won't decrease their labor costs.

You asked why A) is wrong. A) merely states that small businesses are currently paying the mimimum wage, which would go to the apparent paradox, why do they fight a proposed law that would then exempt them? So, it offers no explanation for their protest.
Director
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22 Dec 2004, 06:03
Yep (B) is OA.
But again in (A), it contradicted the info given in the premise: "most" have to pay minimum wage!! -> that explains why they dont want the new law.
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22 Dec 2004, 10:40
It doesn't contradict. What it tells you is that most small business employers currently ARE subject to the min. wage law, and if the new law passes, most small business employers will then be exempt from the minimum wage, which enhances the paradox. I would say that in a case like this, where you think you see contradictions, be careful to choose the response that does what you are asked to do (Explain the Paradox). A) doesn't do that, it actually makes it worse.
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16 Dec 2010, 16:24
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14 Jan 2012, 06:46
qhoc0010 wrote:
Yep (B) is OA.
But again in (A), it contradicted the info given in the premise: "most" have to pay minimum wage!! -> that explains why they dont want the new law.

The point is about new law but not the old law. Hence A is irrelevant.
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28 Oct 2014, 00:38
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If i can state this with an example.If small business group has to pay 500 as a min wage currently. After legislation the new min wage is 1000 suppose then since the larger corporation are exempted they will have to pay 1000. Even though small bus grps are exempted they will have to pay 1000 to retain the employees and thats the reason they are opposing the legislation.
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05 Sep 2017, 12:29
Small-business groups are lobbying to defeat proposed federal legislation that would substantially raise the federal minimum wage. This opposition is surprising since the legislation they oppose would, for the first time, exempt all small businesses from paying any minimum wage.

Boil it down - Even though, the legislation will exempt small businesses from paying min wage, they are still opposing it.
-the higher minimum wage will not actually be legislated for small businesses.
- So there is must be some other way in which this legislation will adversly affect small businesses.

(A) Under the current federal minimum-wage law, most small businesses are required to pay no less than the minimum wage to their employees. - Incorrect - But small businesses will be legally bound to pay new min wages
(B) In order to attract workers, small companies must match the wages offered by their larger competitors, and these competitors would not be exempt under the proposed laws.- Correct - instituting a minimum wage for larger companies creates a de facto minimum wage for smaller businesses -- even if the smaller businesses are not directly required to pay that wage
(C) The exact number of companies that are currently required to pay no less than the minimum wage but that would be exempt under the proposed laws is unknown.- Irrelevant
(D) Some states have set their own minimum wages---in some cases, quite a bit above the level of the minimum wage mandated by current federal law---for certain key industries. - Irrelevant - those are only for a few key industries and we don't even know whether the state min wages cover small businesses as well
(E) Service companies make up the majority of small businesses and they generally employ more employees per dollar of revenues than do retail or manufacturing businesses. - Irrelevant

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17 Mar 2018, 11:44
C and E are irrelevant,
A is about the current law, so A is OFS.
In D, some states,..hardly connect with the argument.
In B, if large companies pay higher wages, then they attract more good workers.
Re: Small-business groups are lobbying to defeat proposed   [#permalink] 17 Mar 2018, 11:44
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