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PRP

Expert replies
by gmatmachoman » Thu Nov 05, 2009 8:36 am
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..But y not C
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Source: — Critical Reasoning |

by GMATBootcamp » Thu Nov 05, 2009 11:07 am
Deconstruct the passage into its key components:

Evidence
- Firms with PRP pay wages that vary with profit
- Last year, metal industry with PRP had 13% increase in productivity

Conclusion

- PRP contracts increase worker productivity

This is a weaken the argument question type, so look for an incorrect assumption or a piece a contradictory evidence.

Answers B and C are outside the scope of the conclusion, so they can be immediately eliminated. Answer B talks about the increased cost of each unit, which is not relevant to worker productivity. Answer C, the fact that PRP contracts are time consuming and complex is not relevant to worker productivity as well.

In solution A, similar results have been found. This does not weaken the argument, so eliminate

Solution E, firms with PRP contracts have higher take home pay than firms with traditional contracts. This is not relevant to worker productivity, so eliminate.

Solution D introduces a new piece of evidence. It states that new equipment was introduced around the same time as PRP contracts. This is contradictory evidence because it weakens the conclusion that PRP contracts are responsible for increased worker productivity. The answer has to be D.
Paul

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