GMAT Reading Comprehension - A Myth in the Ongoing Debate About Minimum Wages

Reading passage question

A myth in the ongoing debate about minimum wages is that raising minimum wages will necessarily increase a country's unemployment rate. While there are cases in which a marginal increase in wage rates might impact the operations of a company dramatically enough for the company to change its operations, in most companies, the cost increases of higher wages will tend to affect a company's bottom line without altering its staffing structure. For example, if a particular fast-food location operates at a particular time window with a staff of five people, then five must be the minimum staffing level for that business to achieve optimal results. In the case of a national fast-food chain, especially, these operational questions in general will already have been optimized. Even before rates are raised, managers of these locations have asked themselves whether they can afford to cut jobs and whether they are staffed at optimal levels (in this case, five people). A more specific calculation is needed. In this example, the precise question is how a marginal increase in staffing costs would compare to the decrease in business that would result in decreasing the staff level from five to four and serving food less quickly. The results of this analysis would not necessarily be consistent across industry, or even across markets and companies within an industry.

“A myth in the ongoing debate about minimum wages”- is a GMAT reading comprehension passage with answers. Candidates need a strong knowledge of English GMAT reading comprehension.

This GMAT Reading Comprehension consists of 4 comprehension questions. The GMAT Reading Comprehension questions are designed for the purpose of testing candidates’ abilities in understanding, analyzing, and applying information or concepts. Candidates can actively prepare with the help of GMAT Reading Comprehension Practice Questions.

Solution and Explanation

1. It can be inferred from the passage that, if two similar fast-food restaurants in different markets have different staffing levels, then

1. operations at one of the restaurants have not been optimized
2. differences in the markets place greater demands for fast serving on one restaurant than on the other
3. the restaurants pay their staff members at different average wage rates
4. the difference in time to serve food between the two locations more than compensates for the difference in total wages paid
5. one of the two restaurants will soon go out of business

2. According to the passage, which of the following statements is true of most companies?

1. If they are forced to raise wages, they will reduce staff size.
2. In order to be competitive, they must employ a staffing structure that need not change in the case of moderate wage increases.
3. If forced to raise wages, they will choose to allow their profits to decrease rather than reduce their number of employees.
4. They already tend to employ their staff at wage rates above the minimum wage.
5. Their wage practices are inconsistent between industries and even within a given industry.

3. Which of the following best describes the relationship of the discussion about fast-food restaurants to the passage as a whole?

1. It exemplifies a misconception mentioned earlier in the passage.
2. It exposes a contradiction between two ideas mentioned in the passage.
3. It serves as an example to support a claim made earlier in the passage.
4. It draws a comparison between two ideas described in the passage.
5. It exemplifies a theory that is refuted later in the passage.

4. The primary purpose of the passage is to

1. introduce an issue of national economic policy and suggest a possible solution
2. illustrate different types of impact of a potential policy change on different corporations
3. propose an alternative to a popular view in an ongoing policy debate
4. advocate a course of action to deal with an economic policy issue
5. point out a flaw in a common view involved in a policy debate

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