GMAT : Analysis of An Argument

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An Argument

83. The following appeared as part of a memorandum from the vice president of Nostrum, a large pharmaceutical corporation.

The proposal to increase the health and retirement benefits that our employees receive should not be implemented at this time. An increase in these benefits is not only financially unjustified, since our last year's profits were lower than those of the preceding year, but also unnecessary, since our chief competitor, Panacea, offers its employees lower health and retirement benefits than we currently offer. We can assume that our employees are reasonably satisfied with the health and retirement benefits that they now have since a recent survey indicated that two-thirds of the respondents viewed them favourably.


Discuss how well reasoned you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underline the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound and what, if anything, would help you better evaluate in conclusion.


The vice president of Nostrum argues that implementing an increase in health and retirement benefits for employees is not a good idea at this time. His main line of reasoning is that an increase in benefits is both financially unjustified and unnecessary - financially unjustified because last year's profits were lower than the preceding year's and unnecessary because Nostrum's chief competitor offers lower benefits to its employees and because a recent Nostrum employee survey indicated that two-thirds of the respondents viewed the current benefits package favourably.

When the argument has some merit, it is completely unconvincing.

Admittedly, the vice president's reasoning linking employee benefits with company profits seems reasonable on its face. Companies that are not profitable are ill-advised to take on additional costs such as increased employee benefits. However, the fact that Nostrum's profits last year were lower than the preceding year does not imply that Nostrum is experiencing financial difficulties that preclude it from increasing employee benefits at this time. Perhaps the previous year's profits were extremely high whereas last year's profits, albeit lower, were sufficient to fund an increase in the benefits package without threatening the company's bottom. line.

Also, the fact that Nostrum's chief competitor provides lower benefits to its employees is not a good reason for Nostrum to deny an increase to its employees. Employee loyalty is an important asset to any company and providing good pay and good benefits are among the best ways to acquire it. Nostrum would be well advised to insure that its employees have little reason to seek employment elsewhere and especially from its chief competitor.

Finally, one can infer from the survey's results that a full one-third of the respondents may have viewed the current benefits package unfavourably. If so, such widespread dissatisfaction would weaken the vice president's argument. Lacking more specific information about how these other employees responded, it is impossible to assess the reliability of the survey's results or to make an informed recommendation.

In conclusion, the vice president's argument against implementing a benefits increase is unconvincing. To strengthen the argument, he must provide evidence that the increase in benefits would have a negative impact on the company's overall profitability. Additionally, he must provide more information about the manner in which the survey was conducted before we can determine the degree of employee satisfaction with the current benefits.

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