Firms adopting "profit-related-pay"(PRP) contracts

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Firms adopting "profit-related-pay" (PRP) contracts pay wages at levels that vary with the firm's profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.

If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?

(A) Results similar to those cited for the metalworking industry have been found in other industries where PRP contracts are used.
(B) Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.
(C) Because introducing PRP contracts greatly changes individual workers' relationships to the firm, negotiating the introduction of PRP contracts is complex and time consuming.
(D) Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.
(E) In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.

OA: D


P.S: Although I got this right, a quick question on Option E -- I think, E STRENGTHENS the argument at hand!

@Verbal Experts -- any quick thoughts ?

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by ceilidh.erickson » Fri Apr 08, 2016 8:49 am
You're absolutely right.

Given: firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts

Conclusion: PRP contracts increase worker productivity

Assumption: Nothing else besides these PRP contracts accounts for the difference in productivity.

If we want to WEAKEN the argument, we want an answer choice that provides an alternative explanation for higher productivity.

(A) Results similar to those cited for the metalworking industry have been found in other industries where PRP contracts are used.
Other industries are irrelevant - we only care about this case.

(B) Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.
There is no reason to believe that cost has any effect on productivity.

(C) Because introducing PRP contracts greatly changes individual workers' relationships to the firm, negotiating the introduction of PRP contracts is complex and time consuming.
Irrelevant. This has no bearing on whether the contract itself affects productivity once it is agreed upon and the employees begin working.

(D) Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.
This weakens the argument. If the firms that introduced PRPs also modernized equipment, then the increased productivity might be a result of better equipment, and not worker motivation based on the contract. Correct.

(E) In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.
This seems related to the question of PRP contracts --> productivity, but it's a trap! As you'll often find on WEAKEN questions, this is an answer choice that does the opposite - it STRENGTHENS the argument. Now, perhaps the workers are not motivated by fluctuating profits, but that wasn't the argument. The argument was that the CONTRACT motivated higher productivity. That contract would include both the PRP provisions as well as presumably the base pay that worked out to 15% higher than average.
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by RBBmba@2014 » Sun Apr 10, 2016 10:15 pm
Hi ceilidh,
So, precisely the option E states:

PRP contracts in place --> the average take-home pay is 15 percent higher (i.e MORE payment of wages).

Hence, E implies : as it's given in the STIMULUS that PRP contracts pay wages that vary with the firm's profits, so that means the CONCLUSION PRP contracts increase worker productivity is STRENGTHENED because increased productivity => higher profits => higher pay.

Right ?

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by ceilidh.erickson » Tue Apr 12, 2016 4:36 pm
Well, that's certainly one explanation. Another explanation could be that these particular contracts already have a higher base pay, AND the pay is increased when profits go up. All we're told is that the pay varies, but we don't actually know what the baseline it. Either way, it would be the provisions of the contract that might be leading to productivity (whether base pay or incentive to make higher wages from increased profits).

Don't bring too many outside assumptions to CR. You might be thinking too much in real-world terms and not dissecting exactly what's given.
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by manihar.sidharth » Wed Apr 13, 2016 7:01 am
ceilidh.erickson wrote:You're absolutely right.

Given: firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts

Conclusion: PRP contracts increase worker productivity

Assumption: Nothing else besides these PRP contracts accounts for the difference in productivity.

If we want to WEAKEN the argument, we want an answer choice that provides an alternative explanation for higher productivity.

(A) Results similar to those cited for the metalworking industry have been found in other industries where PRP contracts are used.
Other industries are irrelevant - we only care about this case.

(B) Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.
There is no reason to believe that cost has any effect on productivity.

(C) Because introducing PRP contracts greatly changes individual workers' relationships to the firm, negotiating the introduction of PRP contracts is complex and time consuming.
Irrelevant. This has no bearing on whether the contract itself affects productivity once it is agreed upon and the employees begin working.

(D) Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.
This weakens the argument. If the firms that introduced PRPs also modernized equipment, then the increased productivity might be a result of better equipment, and not worker motivation based on the contract. Correct.

(E) In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.
This seems related to the question of PRP contracts --> productivity, but it's a trap! As you'll often find on WEAKEN questions, this is an answer choice that does the opposite - it STRENGTHENS the argument. Now, perhaps the workers are not motivated by fluctuating profits, but that wasn't the argument. The argument was that the CONTRACT motivated higher productivity. That contract would include both the PRP provisions as well as presumably the base pay that worked out to 15% higher than average.
Quick question about option D :
Aren't we assuming the fact that firms with traditional contracts have not upgraded themselves to the modern machinery ??

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by ceilidh.erickson » Wed Apr 13, 2016 8:41 am
manihar.sidharth wrote: Quick question about option D :
Aren't we assuming the fact that firms with traditional contracts have not upgraded themselves to the modern machinery ??
We're told that of the firms who modernized, "most of these introduced PRP contracts." We can infer from this that there were some firms who modernized but did not have PRP contracts, but that the majority of those who modernized did have these contracts.

Remember - on weaken and strengthen questions, it's ok to pick an answer that introduces new assumptions. Our job is not to perfectly disprove the argument, it's just to cast doubt on its line of reasoning.
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