Minimum Wage II

Welcome! You are encouraged to register with the site and login (for free). When you register, you support the site and your question history is saved.

     A myth in the ongoing debate about minimum wages is that raising minimum wages will necessarily increase a country's unemployment rate. While there are cases in which a marginal increase in wage rates might impact the operations of a company dramatically enough for the company to change its operations, in most companies, the cost increases of higher wages will tend to affect a company's bottom line without altering its staffing structure. For example, if a particular fast-food location operates at a particular time window with a staff of five people, then five must be the minimum staffing level for that business to achieve optimal results. In the case of a national fast-food chain, especially, these operational questions in general will already have been optimized. Even before rates are raised, managers of these locations have asked themselves whether they can afford to cut jobs and whether they are staffed at optimal levels (in this case, five people). A more specific calculation is needed. In this example, the precise question is how a marginal increase in staffing costs would compare to the decrease in business that would result in decreasing the staff level from five to four and serving food less quickly. The results of this analysis would not necessarily be consistent across industry, or even across markets and companies within an industry.

According to the passage, which of the following statements is true of most companies?

Review: Minimum Wage II


Explanation

This question asks us to make a general inference, so the author's main point can be our primary guide. We will look for a statement that must be true, according to the passage, since such a statement will be best supported. Choice (A) is the opposite of the author's thesis, so it's out. Choice (B) is a distortion of what the passage says. The passage claims that most companies will have optimized their staffing structure, but the invariability of their staffing structures in itself is not required by or helpful to their competitiveness. So (B) is out. Choice (C) is implied by the passage, which says that a wage hike "will tend to affect a company's bottom line without altering its staffing structure" (lines 8-10). (C) is looking good. (D) makes a claim that is not clearly supported by the passage and probably contradicts the passage; for example, if (D) were true, companies would tend not to be affected by the wage hike and the claim in lines 8-10 would be contradicted, as the bottom line wouldn't be hit. So (D) is out. Choice (E) also is a distortion of the passage. At the end of the passage, the author admits that there are differences between company practices and industries but makes a claim contrary to the idea that they are "inconsistent"; rather, they are different but consistent according to the "specific calculation" by which they are, generally, optimized. So (E) is out.

The correct answer is (C).


If you believe you have found an error in this question or explanation, please contact us and include the question title or URL in your message.
Continue »