Question

"Ana: The employees have been complaining that they are underpaid. I have to agree. The majority of them make less than​ $30,000 per​ year, which is less than the median wage in the areas near our foreign subsidiary office.

​David: You've got it wrong. Your concerns about fairness​ don't apply in a foreign company like ours. With fewer than 100​ employees, we need to cut costs in order to survive.​ Besides, the average salary of all the employees is over​ $50,000. What's​ more, the number of departments with an average salary of over​ $40,000 is greater than the number of departments with an average salary under​ $40,000.
Which of the following points out an error in​ David's reasoning?"
a) The number of employees making less than $30,000 impacts overall salary averages significantly.
b) The disparity in departmental averages suggests potential salary distribution issues.
c) Focusing on the median wage rather than the mean could provide a clearer picture of employee compensation.
d) The size of the company doesn't negate the need for fair wages or address employee concerns.

Answer 1

David's argument about the fairness of employee wages is flawed as it ignores the skewing effect of high wages on average salary calculations, and does not consider the potential distribution issues within departmental averages.

Step-by-step explanation:

The student is questioning the argument made by David, who suggests that there are no fairness issues with employee wages at their company. David's reasoning, however, may contain some flaws. When David mentions that the average salary of all the employees is over $50,000 and the number of departments with an average salary over $40,000 is greater than those under, he is overlooking key factors in wage fairness discussions. Option c) Focusing on the median wage rather than the mean could provide a clearer picture of employee compensation, as the use of the mean can be skewed by the high salaries at the top, not reflecting the majority's earnings. Additionally, option b) The disparity in departmental averages suggests potential salary distribution issues is valid, as varying departmental averages can reveal inequities within a company.