In Stenland, many workers have been complaining that they cannot

Question

In Stenland, many workers have been complaining that they cannot survive on minimum wage, the lowest wage an employer is permitted to pay. The government is proposing to raise the minimum wage. Many employers who pay their workers the current minimum wage argue that if it is raised, unemployment will increase because they will no longer be able to afford to employ as many workers.

Which of the following, if true in Stenland, most strongly supports the claim that raising the minimum wage there will not have the effects that the employers predict?

(A) For any position with wages below a living wage, the difficulty of finding and retaining employees adds as much to employment costs as would raising wages.

(B) Raising the minimum wage does not also increase the amount employers have to contribute in employee benefits.

(C) When inflation is taken into account, the proposed new minimum wage is not as high as the current one was when it was introduced.

(D) Many employees currently being paid wages at the level of the proposed new minimum wage will demand significant wage increases.

(E) Many employers who pay some workers only the minimum wage also pay other workers wages that are much higher than the minimum.

Minimum Wage

Step 1: Identify the Question

The wording supports the claim in the question stem indicates that this is a  Strengthen the Argument  question.

Step 2: Deconstruct the Argument

Workers: can’t survive on min. wage

Govt: raise min wage?

Employers: min wage ↑ → # of workers ↓ → unemployment ↑

This is an unusual argument in several ways. First, it includes three separate perspectives: those of the workers, the government, and the employers. Second, the conclusion you need to strengthen is actually in the question stem, not in the argument itself. That conclusion is that raising the minimum wage will not have the effects that the employers predict.

Step 3: Pause and State the Goal

Since this is a Strengthen question, the right answer will support the conclusion. That conclusion is that the employers are not correct about the minimum wage. The right answer will show that   increasing the minimum wage might not increase unemployment  .

Step 4: Work from Wrong to Right

(A) CORRECT . A living wage refers to a wage on which a worker can survive. In the argument, the workers state that the minimum wage is not a living wage. In order to resolve the workers’ complaint, the minimum wage would need to be raised to at least equal a living wage.

According to this answer choice, employers currently have difficulty finding and retaining employees if their positions do not pay a living wage. This difficulty increases employers’ costs. In fact, according to the answer choice, it adds just as much to employers’ costs as increasing wages would. If the minimum wage was raised, and employers kept the same number of employees, these employers would incur both an increase in costs (since they’d have to pay more in wages), and a decrease in costs (since they’d have to spend less on finding and retaining employees). These costs would balance out, meaning that employers would not need to reduce their workforce to save money. Thus, unemployment would not increase.

(B) This answer choice states that raising the minimum wage would not cause employers to incur another additional cost—the cost of increased benefits. However, the cost of employing the same number of workers would still increase, since the cost of wages would be higher and the cost of benefits would be the same. Therefore, the employers’ argument, that they would be unable to employ as many workers, is still sound.

(C) This answer choice suggests that the minimum wage proposal is generally reasonable. However, the conclusion specifically relates to the effect of the proposal on unemployment, not whether the proposal would raise wages to levels out of line with past practices. The answer choice does not give any information specifically regarding unemployment as it is unknown what unemployment levels were when the minimum wage was introduced.

(D) This would actually support the employers’ claim, since it would cause an even greater increase in the employers’ expenses.

(E) The employers claim that they would not be able to afford to employ as many workers after the minimum wage increase. This is still a reasonable argument even if some of the workers currently make much more than the minimum wage. The employers would have to pay at least some of their employees more than they do currently, and this would increase the employers’ costs, meaning that they couldn’t employ as many people.

GMATNinja · Accepted Answer

Kudos  Vyshak  for the replies! I'll add my two cents, too...

Choice (A) refers to the CURRENT cost of finding and retaining employees. Let's say that an employer pays $5 per hour and that employees need $8 per hour to earn a "living wage." The employer might be saving money by paying $5/hour instead of $8/hour but, according to (A), there is another hidden cost: having to find and retain employees who are willing to work for such low pay is costly.

For example, workers would obviously prefer to work someplace that pays more. They might take the job for $5/hour when they are desperate, but as soon as they find something a little better, they will likely quit. (A) implies that the employer will constantly have to waste time and money finding and replacing workers. According to (A), this hidden cost is the same as the cost of raising wages to $8.

So changing the minimum wage to $8 will increase the amount the employer spends on wages but will DECREASE the amount the employer spends finding/replacing workers. If (A) is true, then implementing the minimum wage should have no net effect on the employer's bottom line.

I hope that helps!

Divyadisha · Answer

Employer's statement- Unemployment will increase because they will no longer be able to afford
to employ as many workers.

We have to find out that employer's prediction is not true. That means employment will not decrease or that employer can afford the employment.

A) For any position with wages below a living wage, the difficulty of
finding and retaining employees adds as much to employment costs
as would raising wages.
 It says that cost to maintain the employees at current wage = cost after raising wages.

If cost remains the same, then employee can afford it as there is no additional burden. Correct answer.

B) Raising the minimum wage does not also increase the amount
employers have to contribute in employee benefits.
 Well, that's a good thing for an employer. But raising the wage will increase financial burden, leading to unemploymnet? No answer 
C) When inflation is taken into account, the proposed new minimum
wage is not high as the current one was when it was introduced.
 Inflation is not talked about in the argument. 
D) Many employees currently being paid wages at the level of the
proposed new minimum wage will demand significant wage
increases.
 So will unemployement increase or decrease? No answer 
E) Many employers who pay some workers only the minimum wage
also pay other workers wages that are much higher than the 
minimum.  Good for employees, but it still doesn't address our concern.

unverifiedvoracity · Answer

Employers say that they will not be able to afford to employ as many employees as they today if there is an increase in min. wages. In order to strengthen the claim that raising minimum wages will not have have the effects that employers predict, we have to find a statement that says due to some reason employers will not be able to let go of employees even after minimum wages increase.

A) For any position with wages below a living wage, the difficulty of
finding and retaining employees adds as much to employment costs
as would raising wages.

Option A says it is not in the best interest of employers to let go of employees on minimum wage if the minimum wage increases, as it will be costly to find and retrain employees.

My answer is A.

vnigam21 · Answer

In Stenland, many workers have been complaining that they cannot survive
on minimum wage, the lowest wage an employer is permitted to pay. The
government is proposing to raise the minimum wage. Many employers who
pay their workers the current minimum wage argue that if it is raised,
unemployment will increase because they will no longer be able to afford
to employ as many workers.

Which of the following, if true in Stenland, most strongly supports the claim
that raising the minimum wage there will not have the effects that the
employers predict?

A) For any position with wages below a living wage, the difficulty of
finding and retaining employees adds as much to employment costs
as would raising wages.

B) Raising the minimum wage does not also increase the amount
employers have to contribute in employee benefits.

C) When inflation is taken into account, the proposed new minimum
wage is not high as the current one was when it was introduced.

D) Many employees currently being paid wages at the level of the
proposed new minimum wage will demand significant wage
increases.

E) Many employers who pay some workers only the minimum wage
also pay other workers wages that are much higher than the
minimum.

As per the argument we just know that raising the minimum wage will lead to an increase in unemployment. Raise in Minimum wage itself is causing employers to say that they will no longer be able to afford to employ as many workers. Anything in addition/extra thus, does not really matter. Even if the amount employers have to contribute in employee benefits increases, it worsens the scenario. It acts as an addon to the problem of unemployment which is mentioned in the argument. Analogy, if I cannot afford a 5$ lead pencil, knowing that along with the purchase of a 5$ pencil, I do not need to pay for 2$ lead for after usage, makes the argument stand as it is. The other case, if the amount employers have to contribute in employee benefits does not increase the amount employers have to contribute in employee benefits - it means the amount could be same or it decrease. But knowing this information does really matter?? No, Right? Because anyways, the minimum wage is still increased, so the argument stands as it is. C) When inflation is taken into account, the proposed new minimum wage is not high as the current one was when it was introduced. Okay.. But so what? Do we really need to take inflation into account? Is the argument concerned about inflation?? Argument is just concerned with the fact that minimum wage would be increased, and whether after considering any other factor makes that cost seem less, that does not really matter because anyways, as a whole, the minimum wage is still increased, so the argument stands as it is. D) Many employees currently being paid wages at the level of the proposed new minimum wage will demand significant wage increases. so what? are we concerned with those employees, who are currently being paid wages at the level of the proposed new minimum wage, and their demands.. No, right? So, irrelevant. ALso, just demanding does not mean that their demands will be fulfilled. So, it adds nothing to the existing stimulus. E) Many employers who pay some workers only the minimum wage also pay other workers wages that are much higher than the minimum. Definitely that's true. But we are not concerned with those workers. Our argument is basically concerned with increase in minimum wage. Not with the proportion of wages compared with the minimum paid workers. So, irrelevant. Options D and E are totally irrelevant and could be quickly eliminated.

proabhinav · Answer

A) For any position with wages below a living wage, the difficulty of finding and retaining employees adds as much to employment costs as would raising wages.
(C) When inflation is taken into account, the proposed new minimum wage is not high as the current one was when it was introduced.

Dear Team

I was very much lost between A & C, though I chose A as I felt it is stronger than C and also I might not have fully comprehended statement C

May I request if someone can help me understand what C means and how it fits into the argument ?

septwibowo · Answer

Hi! I'm not an expert (at least until now), but trying to help.

In point C, we only talk about "how much is our minimum wage now -- especially in comparison with the first minimum wage (when it was introduced)"

Does this answer discuss about affordability of this new wage for employers? I don't think so.

The minimum wage can be HIGHER than the first minimum wage, but employers can easily afford it.
The minimum wage also can be significantly LOWER than the first minimum wage, but employers cannot afford it.

Hope this helps!

goaltop30mba · Answer

aragonn   GMATNinja   egmat   Vyshak

option a :  For any position with wages below a living wage , the difficulty of finding and retaining employees adds as much to employment costs as would raising wages.

aren't we concerned about positions at a minimum wage?  maybe the difficulty mentioned in option a isn't really there for the positions offering minimum wage.

please help me understand this.

rnn · Answer

why is option "(B) Raising the minimum wage does not also increase the amount employers have to contribute in employee benefits" incorrect?

i thought that this would mean that the employers will not have to pay the employee benefits and therefore can increase the wages without any additional cost... kindly let me know what is wrong with this reasoning

GMATNinja · Answer

A "living wage" is a wage that covers the standard costs of living. Because workers in Stenland "cannot survive on minimum wage," we can infer that minimum wage jobs do not provide a living wage.

Take another look at (A):
 
Based on our analysis above, we know that the "position  with wages below a living wage" include all minimum wage jobs. So, employers spend as much on finding and retaining these employees as they would spend on paying an increased minimum wage. Because the cost will be the same to employers, (A) "supports the claim that raising the minimum wage there will not have the effects that the employers predict."

GMATNinja · Answer

Even if increasing minimum wage "does not also increase the amount employers have to contribute in employee benefits," employers will still have to pay each minimum wage worker more per hour than they currently pay -- so, the cost to the employer will go up.

Let's say that minimum wage is currently $10 per hour, and employers do not have to contribute at all to employee benefits. If the minimum wage is raised to $15 per hour and employers still pay nothing toward employee benefits (in accordance with the information in (B)), the overall cost for each employee will still increase due to the increased hourly wage. This is in line with the employers' expectation that they will not be able to pay as many workers. For this reason, (B) is out.

For an explanation of the correct answer, please see  this  post.

I hope that helps!

chrtpmdr · Answer

Why do many in here discard

(C) When inflation is taken into account, the proposed new minimum wage is not high as the current one was when it was introduced.

because of the reason it is out of context?

This is a strengthen / support question and regarding to many books (for example Powerscore) "Information outside the sphere of the stimulus is allowed as correct answer choices"

I was also indecisive between A) and C) but I could not exclude C) for the same reason others excluded it.

To me it makes sense to discard c) but not based on the argument "it is out of the context"
Employers claim that raising the current minimum wage would lead to an increase in unemployment; 
If we look at (C) it just tells us that when Inflation is taken into account, the minimum wage is not as high as the current one when it was introduced.

Now what does that tell us? Imho nothing, because we can assume that the Employers are already calculating in real wage terms and argue that a increase would still hurt them.
That would be my reasoning.

GMATNinja · Answer

Your reasoning ("Now what does that tell us? Imho nothing") is sound here.

Many employers have concluded that if the current minimum wage is raised, unemployment will increase because they will no longer be able to afford to employ as many workers.

We eliminate (C) because this new information about the inflation-adjusted figure and historic wage doesn't give us any reason to doubt whether employers will employ fewer workers (and therefore whether unemployment will increase). There's just no connection between these facts that why employers would have to employ fewer workers.

Choice (C) presents no logical challenge to the employer's conclusion, while (A) does.

I hope that helps!

rk0510 · Answer

Hi Experts,
 GMATNinja   egmat 
The the employers stance was that increasing minimum wages will increase unemployment because they will be unable to afford it. So if the wage budget was $50 and the min wage was $5, they could have 10 people on staff. But now the minimum wages hypothetically is raised to $10, they can only have 5 people on staff. Their argument was related to unemployment related to affordability. In this question, we are trying to prove that increasing minimum wages wont lead to unemployment due to affordability i.e. increasing minimum wages wont lead to less people being employed as employers would be able to afford them, contrary to what the employers believe. Now, option A says that if they didn't increase minimum wage they would eventually have to pay the difference to find and retain employees - so you might as well avoid disruption and pay the fees - but in no way is this telling us that unemployment wont increase because the employers argument was that i have $50 only, so I can either afford 10 people at $5 or 5 at $10. So if he has $50 only and there are hidden charges involved if you pay an employee below minimum wage, the employer was making a reasonably sound argument by saying that he wont be able to afford it and hence unemployment will fall. It is more likely that he assumed this hidden cost and therefore made this statement, because the limitation is $50 budget he has. Am I making sense? Where am I going wrong?

GMATNinja · Answer

Sorry, this isn't quite true. The question doesn't ask us to PROVE anything. Here's the question as it's worded:

We are asked which answer choices  most strongly supports  a specific claim: That raising the minimum wage will not cause unemployment to increase.

Sorry, this isn't quite true, either. According to the passage, employers who pay their workers the current minimum wage argue that if it is raised, they will  no longer be able to afford  to employ as many workers. That statement gives us absolutely no information on non-wage costs of being an employer. It doesn't tell us anything about how employers distribute their overall cashflow, either.

Your re-phrasing of the question and the way you're trying to spell out the employer's position using your own numbers have taken you away from what the question asks and what the passage says. And when you drift away from the intended question and the given information, you'll find it very hard to evaluate answer choices effectively.

Precise reading will save you an immense amount of effort as you evaluate answer choices. Much more on that in our  beginner's guide to CR .

I hope this helps!

KarishmaB · Answer

Workers are complaining that they cannot survive on minimum wage.
The government is proposing to raise the minimum wage (looks like the workers claim is genuine)

Employers hypothesis - if it is raised, unemployment will increase because they will no longer be able to afford to employ as many workers.

What will weaken the employers' claim?

Either we need to say that employers' cost will not increase even if they increase the wages (because some other cost will decrease) or that unemployment will not increase because number of jobs available will increase.

(A) For any position with wages below a living wage, the difficulty of finding and retaining employees adds as much to employment costs as would raising wages.

This says that there is a living wage (the wage required to live - perhaps the wage to which the govt will now raise the minimum wage). When employers pay the current minimum wage (which is below living wage), they face costs of finding and retaining employees (because few people want to work at current minimum wage). This cost is as much as the cost that employers will face if they increase minimum wage to living wage. 
So looks like the employers cost will not increase if the minimum wage increases to living wage. They will need to pay more compensation but they will save on cost of finding and retaining employees. Correct.

(B) Raising the minimum wage does not also increase the amount employers have to contribute in employee benefits.

Doesn't matter if some other cost will not increase (in no way is it implied that it may decrease). Increasing the wages is itself enough to cause trouble for employers.

(C) When inflation is taken into account, the proposed new minimum wage is not high as the current one was when it was introduced.

Irrelevant. The employers will find it hard to support this wage and that is all that matters to us.

(D) Many employees currently being paid wages at the level of the proposed new minimum wage will demand significant wage increases.

It is irrelevant (if anything, this makes the employers' claim stronger).

(E) Many employers who pay some workers only the minimum wage also pay other workers wages that are much higher than the minimum.

Doesn't matter if they are paying much more to others. They cannot reduce the wages of others.

Answer (A)

Durgvanshi · Answer

GMATNinja So if option A says is saying that cost of hiring will be greater than cost of new minimum wage then its beneficial for employer to give new minimum wage to all its employee. But in this case there will not be any UNEMPLOYMENT as it is stated in argument- How we are ignoring a stated fact that employer will no longer be employing same number of people. To elaborate - Its is clear from the argument that Employers wont be able to afford the new minimum wage and thus that will lead to UNEMPLOYMENT so why the question of hiring is coming into picture? I mean since new Minimum Wage is unaffordable , the employer will just lay off people and adjust that saved cost to pay new minimum wage to other retained employees and only in this scenario UNEMPLOYMENT will increase.

Though I agree Option A is best but I got this doubt and need your inputs to clarify it.

Thanks

Though I agree Option A is best but I got this doubt and need your inputs to clarify it.

Thanks

GMATNinja · Answer

I’m going to borrow heavily from our  previous post  here. The employers  argue  that raising the minimum wage will increase unemployment because the employers will no longer be able to afford as many workers. But we don’t accept this as necessarily true. Instead, the question asks us to find an answer choice that indicates the employers’ argument is not true. In other words, which answer choice indicates that unemployment will not increase as a result of a raise in the minimum wage?

(A) does not tell us that the cost of finding and retaining employees WILL BE  greater  than the cost of the new minimum wage. Instead, it says that the CURRENT cost of finding and retaining employees for positions that pay below a living wage is  as much as  the cost of raising the minimum wage. Presumably, when the minimum wage is raised to the level of a living wage, the cost to find and retain employees will decrease. This means that employers will not need to lay off employees in order to cover the wage increase, and the employers can instead maintain the same number of employees. Therefore, unemployment will not increase, and raising the minimum wage will not have the effect that the employers predict. So, (A) is correct.

I hope that helps!

Hoozan · Answer

VeritasKarishma   GMATNinja  I went through the posts on this forum but I guess I haven't understood (C) the way it should be.

Let's say that the old wage was $X Now after considering inflation the new wage is not higher than $X. If that's the case then the employers won't mind this wage increase right? since its not higher than what they are currently paying and thus will not create any unemployment

I guess I am way off with this one :p

GMATNinja · Answer

(C) tells us that, when taking inflation into account, the new minimum wage is not as high as the current one was  when it was introduced.

Essentially, the current minimum wage might be the same  dollar  amount as when it was introduced, but that money is now worth  less  because of inflation.

Let's say the current minimum wage was introduced 20 years ago and is $10. A bunch of inflation happens, and now that $10 is worth way less. In fact, you'd have to pay $20 to someone just to match the previous value of the $10 wage.

(C) tells us that the new minimum wage won't exceed the OLD, HIGHER value of the $10 minimum wage. In other words, it won't exceed the $20 wage in current dollars.

So, employers would go from paying $10 to $20 in present-day dollars, and they might not be able to pay as many workers.

Eliminate (C).

I hope that helps!

In Stenland, many workers have been complaining that they cannot

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In Stenland, many workers have been complaining that they cannot

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