Economist: During a recession, a company can cut personnel costs either by laying off some employees without reducing the wages of remaining employees or by reducing the wages of all employees without laying off anyone. Both damage morale, but layoffs damage it less, since the aggrieved have, after all, left. Thus, when companies must reduce personnel costs during recessions, they are likely to lay off employees.
Which one of the following, if true, most strengthens the economist's reasoning?
(A) Employee morale is usually the primary concern driving companies' decisions about whether to lay off employees or to reduce their wages – It is prior to decision of cost cutting but it does not address the issue that why Laying off is better
(B) In general, companies increase wages only when they are unable to find enough qualified employees – No mention of instances for increasing the wages
(C) Some companies will be unable to make a profit during recessions no matter how much they reduce personnel costs – Profits are not center of discussion.
(D) When companies cut personnel costs during recessions by reducing wages, some employees usually resign – Even if after cutting personnel cost, people leave then this is not good starategy. But it does not address why other strategy i.e. laying off people is better.
(E) Some companies that have laid off employees during recessions have had difficulty finding enough qualified employees once economic growth resumed – Seems correct
