to make an impact on their company's budgets. Because labor rates are highly visible,
managers can easily compare their company's rates with those of competitors. Furthermore, labor rates often appear to be a company's most malleable financial variable: cutting wages appears an easier way to control costs than such options as reconfiguring work processes or altering product design. The myth that labor rates and labor costs are equivalent is supported by business journalists, who frequently confound the two. For example, prominent business journals often remark on the “high" cost of German labor, citing as evidence the average amount paid to German workers. The myth is also perpetuated by the compensation consulting industry, which has its own incentive to keep such myths alive. First, although some of these consulting firms have recently broadened their practices beyond the area of compensation, their mainstay continues to be advising companies on changing their compensation practices. Suggesting that a company's performance can be improved in some other way than by altering its pay system may be empirically correct but contrary to the consultants’ interests. Furthermore, changes to the compensation system may appear to be simpler to implement than changes to other aspects of an organization, so managers are more likely to find such advice from consultants palatable. Finally, to the extent that changes in compensation create new
problems, the consultants will continue to have work solving the problems that result from their advice.
PREP2012-Pack1-RC-005-01 VRC000361-01 Medium The author of the passage mentions business journals (see highlighted text) primarily in order to
A. demonstrate how a particular kind of evidence can be used to support two different
conclusions
B. cast doubt on a particular view about the average amount paid to German workers
C. suggest that business journalists may have a vested interest in perpetuating a particular
view
D. identify one source of support for a view common among business managers
E. indicate a way in which a particular myth could be dispelled
PREP2012-Pack1-RC-005-02 VRC000361-02 Easy
According to the passage, which of the following is true about changes to a company's compensation system?
A. They are often implemented in conjunction with a company's efforts to reconfigure its
work processes.
B. They have been advocated by prominent business journals as the most direct way for a
company to bring about changes in its labor costs.
C. They are more likely to result in an increase in labor costs than they are to bring about
competitive advantages for the company.