Self-study
When companies' profits would otherwise be reduced by an increase in the minimum wage (a wage rate set by the government as the lowest that companies are allowed to pay), the companies often reduce the number of workers they employ. ███ █ ██████ ████████ ██ ███ ███████ ████ ███ ███ ██████ ██ ███ ████████ ██ ███ █████████ █████████ █████ ████ ███████ ███ ████ ███ ███████ █████
"Surprising" Phenomenon
Minimum-wage increases usually result in layoffs so that profits don't fall, yet the fast-food industry didn’t experience layoffs after a recent minimum-wage increase.
Objective
The right answer will be a hypothesis explaining why the fast-food industry didn’t react as industries generally do to a minimum-wage increase, especially considering that most fast-food industry employees are paid the minimum wage. The explanation might explain how fast-food companies can maintain their profits despite paying higher wages.
8.
Which one of the following, ██ █████ ████ █████ ██ ███████ ███ ███ ████████ ██ ███ ███████ ████ ███ ███ ██████ ███ ██████ ██ ████ ██ ███ █████████ █████████
a
After the recent ████████ ██ ███ ███████ █████ █████████ ███ ████████ ██ ███ █████████ ████████ ███████ █████████ ██ █████████ ███████ ██ ████ ██████ ██ ██████████ █████ ██ █████ ███ ████ ██ ███ ████ █████████
Since fast-food workers got a raise, they didn’t quit as often. Employers were therefore able to save on recruiting new workers. This saving allowed them to continue employing just as many workers without any loss of profits.
b
If, in any █████████ ██ ████████ ██ ███ ███████ ████ █████ ██ ███ ███████████ ██ ████ ████ ████ ███ ███ ███████ █████ ████ █████████████ ███████████ █████████ ████ ████ ██ ██████████ ██ ████ █████████
The increase in the minimum wage didn’t lead to the elimination of minimum-wage fast-food jobs. Besides, if anything, laying off higher-paid supervisors would let the companies save even more money.
c
With respect to ███ ████████ ██ █████████ ██ ███ ███████ █████ ███ █████████ ████████ ████ ███ ██████ █████████████ ████ █████ ██████████ ████ ██████ ████ ███████ ██ ███ ███████ █████
In other words, if wage increases would lower profits, then fast-food companies would lay off workers. But this doesn't tell us how fast-food companies were able to maintain their profitability, so it's not helpful.
d
A few employees ██ ███ █████████ ████████ ████ ███████ ███████ ████ ████ ███ ████ ██████ ███████ ████ ██████ ███ ███ ███████ ████ ███ ████████████
Exceptions aside, we know that most fast-food employees are paid minimum wage, so we still need to know why they weren’t laid off when costs rose due to the minimum wage increase.
e
Sales of fast ████ ██ ███████ ███ ███ ████ ███ ███████ ████ ███ ███ ████████ █████████ ███ ██████ ██████ ██ ███ ███████ █████
So fast-food companies did not see higher sales from minimum-wage workers due to the recent change. This eliminates a possible reason that layoffs didn't take place, but doesn't get us any closer to an explanation.