Question


The difference in average annual income in favor of employees who have college degrees, compared with those who do not have such degrees, doubled between 1980 and 1990. Some analysts have hypothesized that increased competition between employers for employees with college degrees drove up income for such employees.

Which of the following, if true, most seriously undermines the explanation described above?

(Because of copyrights, the complete official question is not copied here. You can access the question here: GMAT Club)

Difficulty: Medium

Accuracy: 71%

Based on: 6465 sessions

Solution


The Story

The difference in average annual income in favor of employees who have college degrees, compared with those who do not have such degrees, doubled between 1980 and 1990.
Avg income of employees with college degrees – Avg income of employee without college degrees
This difference doubled over 10 years.
(The difference doubled – so maybe the higher value increased, maybe the lower value decreased, or maybe a combination of both)

Some analysts have hypothesized that increased competition between employers for employees with college degrees drove up income for such employees. A potential reason given is increased competition for college graduates. (So, these analysts are indicating that salaries of college grads would have shot up.)

Gist:
The difference between the average salary of graduates and non-graduates has doubled over 10 years. Some people hypothesize that competition for graduates would have led to this difference (basically, the salaries of graduates would have increased).

Question Stem

Which of the following, if true, most seriously undermines the explanation described above?

The difference between the average salaries has doubled.
What’s the explanation?
Increased competition for college graduates would have led to the increased difference.

Prediction:
What would undermine this explanation?

The correct answer could offer an alternate reason for the difference doubling:

  • What if the salaries of non-graduates reduced? All we know is that the difference doubled. The difference could have doubled if the average salary of a graduate increased, or the average salary of a non-graduate decreased, or if a combination of both happened.
  • What if there was another reason for why graduates’ salaries increased? Does the increase have to be because of increased competition?
  • Basically, an answer choice that gives us an alternate reason for why the difference doubled.

Even if the correct answer doesn’t give an alternate reason, it could indicate that at least the increased competition for degree holders couldn’t be the reason.

Answer choice analysis


Answer Choice: A

Correct

Selected by: 71%

If in the 80’s a growing percentage of graduates were unable to find jobs requiring a college degree and could only find unskilled jobs, then, it appears, the competition for graduates would not have increased. Thus, the analysts’ hypothesis that salaries for graduates would have gone up because of increased competition for them doesn’t make sense.

Now, in case you’re wondering, isn’t it possible:

  • that the growth in percentage was very minuscule
  • or, that unskilled jobs paid more?

The answer is: yes, those possibilities exist. However, we are looking for something that undermines the explanation and not necessarily something that makes the explanation impossible to be true. We don’t need to completely destroy the explanation. We need to seriously undermine it. So, even if extreme possibilities exist, that’s fine as long as our confidence in the explanation goes down. This answer does that.


Answer Choice: B

Incorrect

Selected by: 1%

So perhaps there have been fewer freshers joining the workforce, or maybe people join at a higher age. The overall average age of employees increased – across graduate and non-graduate employees. This option does not differentiate between graduates and non-graduates. No impact.


Answer Choice: C

Incorrect

Selected by: 3%

Statement: The level of employment remained pretty constant.
This statement does not give any insight into why the income gap might have doubled. This option does not lead me to believe more or less in the increased competition hypothesis. No impact.


Answer Choice: D

Incorrect

Selected by: 7%

Statement: The difference in average income between advanced degrees-holders and bachelor’s degrees-holders also increased.

  1. Why did the difference increase?
  • Did the average income of advanced degrees-holders go up?
  • Did the average income of bachelor’s degrees-holders go down?
  • Was it some combination of both?

We don’t know.

2. Even if we assume that the difference increased because the average income of employees with advanced degrees increased significantly, what were the reasons behind the increase? The reason may well be increased competition still.

This answer choice does not lead me to question the given reason of increased competition.


Answer Choice: E

Incorrect

Selected by: 17%

Statement: At least one non-graduate earned an income close to the top incomes earned by graduates.

This answer choice is the most commonly select wrong answer.

In order to understand why this answer choice is incorrect, first let me ask you, what if the option read:
(E’) During the 1980s there were some many employees with no college degree who earned incomes comparable to the top incomes earned by employees with a college degree.

Would this modified statement undermine the explanation?

Remember, the explanation we need to undermine is that the increased competition for graduates led to the increased difference between the average salaries.

We are not looking for an answer that leads us to question whether the difference between the average salaries did actually double or not.
The difference did double.
Our job is to question the given reason behind it.

After reading this statement, I am simply more confused about how did the difference between graduates’ and non-graduates’ average salaries double?

However, we are given in the passage that the difference in average salaries did indeed double between 1980 and 1990. Through this answer choice I do not learn anything new about what might or might not have caused the difference to double.

The answer choice is wrong even if we replace the word ‘many’ back with ‘some’. The same reasoning still applies. We have to undermine the explanation. We do not have to undermine the fact that the difference in average annual incomes doubled.

Many people eliminate this answer choice based on the word ‘some’. Something along the lines of: when dealing with averages some people can be outliers. That reasoning is flawed – as I have tried to explain by replacing the word ‘some’ with ‘many’.

Additional Notes

The correct answer choice in this question highlights a very important distinction:

In order to undermine the current explanation,

  • the correct answer could present an alternative explanation,
  • or indicate that at least the given explanation would not have been the case.

    Option A does the latter. I find some people eliminate this answer choice after simply deciding that it does not present an alternative explanation. However, such reasoning is incomplete. It misses the second part that the statement directly reduces my belief in the current explanation.


Between 1980 and 1990 = During the 1980s

If you have any doubts regarding any part of this solution, please feel free to ask in the comments section.

Anish Passi

GMAT Coach

With over a decade of GMAT training experience, top 1 percentile scores on the CAT and GMAT, Anish is one of the most qualified GMAT coaches in India. He has founded and served as Director in two ed-tech startups in the past. An alumnus of IIM Ahmedabad and McMaster University, Canada, he strongly believes in the right way of learning, and in learning to grow and not just to get a score, an admission or a job. Anish offers private tutoring and live-online classroom courses. His sessions are often sprinkled with jokes that only he finds funny (you’ve been warned). To connect with him, write to him at a@TheGMATCo.com

How useful was this post?

Click on a star to rate it!

We are sorry that this post was not very useful for you!

Let us improve this post!

Tell us how we can improve this post?

>