wage policy is determined solely by whatever wages a market can currently bear. This
assumption overlooks the peripheral costs of reducing or eliminating benefits. For
example, employee morale is likely to decline if Perks eliminates benefits; as a result,
some employees could become less productive, and others might quit. Even if Perks can
readily replace those employees, training costs and lower productivity associated with
high turnover may outweigh any advantages of redirecting funds to plant construction.
Moreover, because the recommended reduction in benefits is intended to fund the
retrofitting of an entire plant or the building of a new one, the reduction would
presumably be a sizable one; consequently, the turnover costs associated with the
reduction might be very high indeed.
In conclusion, this argument is not convincing, since it unfairly assumes that a
broad employment statistic applies to one specific industry, and since it ignores the
disadvantages of implementing the plan. Accordingly, I would suspend judgment about
the recommendation until the author shows that unemployment in Parks industry is
high and until the author produces a thorough cost-benefit analysis of the proposed plan.
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