Critical Reasoning

Small-business groups are lobbying to defeat proposed federal legislation that would substantially raise the federal minimum wage. This opposition is surprising since the legislation they oppose would, for the first time, exempt all small businesses from paying any minimum wage.

Which of the following, if true, would best explain the opposition of small-business groups to the proposed legislation?

(A) Under the current federal minimum-wage law, most small businesses are required to pay no less than the minimum wage of their employees.

(B) In order to attract workers, small companies must match the wages offered by their larger competitors, and these competitors would not be exempt under the proposed laws.

(C) The exact number of companies that are currently required to pay no less than the minimum wage but that would be exempt under the proposed laws is unknown.

(D) Some states have set their own minimum wages - in some cases, quite a bit above the level of the minimum wage mandated by federal law - for certain key industries.

(E) Service companies make up the majority of small businesses and they generally employ more employees per dollar of revenues than do retail or manufacturing businesses.

This is a Resolve-Explain (Resolve the Paradox) question. The right answer will explain why small-business groups oppose raising the minimum wage even though the law would exempt them from paying the new wage. These businesses must expect a negative outcome (negative for them) from the law that the argument has overlooked. The answer is B. I go through the question in detail in the full solution below (taken from the GMATFix App).



-Patrick