Chapter 15, Problem 15.87ACB

RIF plan to fire older employees. Reducing the size of a company’s workforce in order to reduce costs is referred to as corporate downsizing or reductions in force (RIF) by the business community and media. Following RIFs, companies are often sued by former employees who allege that the RIFs were discriminatory with regard to age. Federal law protects employees over 40 years of age against such discrimination. Suppose one large company’s employees have a median age of 37. Its RIF plan is to fire 15 employees with ages listed in the table below.

1. a. Calculate the median age of the employees who are being terminated.
2. b. What are the appropriate null and alternative hypotheses to test whether the population from which the terminated employees were selected has a median age that exceeds the entire company’s median age?
3. c. Conduct the test of part b. Find the significance level of the test and interpret its value.
4. d. Assuming that courts generally require statistical evidence at the .10 level of significance before ruling that age discrimination laws were violated, what do you advise the company about its planned RIF? Explain.