In an effort to reduce costs across the board, Pilchard wishes to hire recent graduates of MBA programs who have little experience.

In an effort to reduce costs across the board, Pilchard wishes to hire recent graduates of MBA programs who have little experience. His firm would be paying them above competitive salaries even if it offered them one-half the salaries of its present staff members who are over age 40. Should Pilchard terminate the older employees in favor of the younger, less-expensive workers? What if one or more of the older employees were willing to accept a 50 percent pay cut? Can Pilchard make the 50 percent pay cut a condition on older employees for remaining employed?