GMAT Critical Reasoning
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 metal-working 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 in 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.
Correct Answer: D