Small-business groups are lobbying to defeat proposed federal legislat

Question

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?

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.

hilairity · Accepted Answer

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.

qhoc0010 · Answer

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.

hilairity · Answer

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.

Chembeti · Answer

The point is about new law but not the old law. Hence A is irrelevant.

nishantnim · Answer

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.

Skywalker18 · Answer

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?

Type - paradox
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

Answer B

skidstorm · Answer

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.

anothermillenial · Answer

This is a Resolve Paradox question type as indicated by the lack of conclusion here. The paradox we are given is:

Small business groups are trying to get rid of a law that would increase federal minimum wage. (Well, sure, that makes sense. That means they would pay less!) 
 But the law would exempt the small business from paying at all. (Wait, what? Why would you oppose it if you don’t have to pay anything at all? Hm…)

Since the stimulus articulates “small business groups”, it must be that their minimum wage might be affected by how the law affects large business groups! Let’s see what we’ve got. From a first quick scan, it looks like (B) is pretty golden. But let’s do some error analysis anyway.

This answer choice discusses the current law and does not resolve the discrepancy. It only adds an additional premise.

Ah, this clears up the issue. If larger companies are forced to up their minimum wage AND small companies compete with them for employees, the small companies would basically also have to raise their wages! This is the correct choice.

We don’t really care for the number of companies in the CURRENT state. We care about why the small businesses are opposing a law that seems beneficial to them!

Hm, we’re talking about some states as a whole but we want to know how this law affects small and large businesses. This doesn’t address the premises.

The difference between service companies and retail/manufacturing business does not clear up the discrepancy here. This answer choice brings in an irrelevant distinction. We don’t care about what type of companies make up small businesses.

CEdward · Answer

I am wondering here if this is a lose-lose situation anyway. i.e. large and small companies have to pay minimum wage under the current circumstances but large companies can add sweeteners/incentives that would lure attract people and small companies would have to keep up. So the questions about policy changes are moot?

Not sure if I am making sense here.

Not sure if I am making sense here.

mSKR · Answer

You did not consider the case after policy changes that for large companies minimum bar is raised further, so indirectly it would further make small companies to increase their cost. So any further increase of minimum wages would be non beneficial for small companies even if they are exempt . But note large companies are not under exemption ( option b 2nd part).

So resistance to policy makes sense in presence of B option even if small companies are exempt.

VerbalBot · Answer

Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.

Small-business groups are lobbying to defeat proposed federal legislat

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Critical Reasoning (CR) Questions

Small-business groups are lobbying to defeat proposed federal legislat

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards