STAT 130: Statistics for Business (Spring 2019)

Salary Case Study

Group Members:

Ahmed Ali Alyahaai – 201611113

Course Instructor: Dr. Tarek El Ganzoury

Section: 01
SUMMARY:

The sales professional company in Dubai wanted to know and establish if there is any relationship
between level of experience the workers had and the amount of salary they receive. They wanted
to know if as you work more your salary changes i.e. whether increase or decrease or if salary
doesn’t change with respect to changes in years of experience. They collected a sample of 120
employees both employed inside the company or outside the company, and asked them on their
years of experience and the amount of salary they receive. The years of experience was
categorized under three different classes i.e. low which was between 1 to 10 years, medium
which was between 11 to 20 years and finally high which was 21 and more years.

INTRODUCTION:

The following report will analyze the different relationships between salary and level of
experience both inside the company and outside if there is any. we took the observations made
between the 120 employees and came up with interesting conclusions.

 We first summarized the data observed using descriptive statistics.

 We then proceeded to find 95% confidence interval of the mean annual salary for all
salespersons and of inside salespersons.
 We then tested if there was any significant difference of the mean salary due to position
using a 0.05 level of significance.
 We also constructed a 95% confidence interval estimate of the mean salary difference for
inside and outside salespersons and also tested if there was any significant difference of
the mean salary due to years of experience using a 0.05 level of significance.
 We then moved to testing proportions by constructing a 95% confidence interval of the
difference in proportion of inside salespersons between Low and High experience and
determining if there was any difference between the proportions of inside salesperson
between Low and High experience again using a 0.05 level of significance.
 Finally, we determined if the salesperson position is dependent on the salesperson
experience.
 1- Use descriptive statistics to summarize the data.

Descriptive statistics refers to analysis of data that helps in summarizing data in a

meaningful way. In our case, salary recorded is the only quantitative data, so we are able
to get the following information.

Salary (AED)
Count 120
Mean 162,313.89
sample variance 734,229,862.22
sample standard
deviation 27,096.68
Minimum 121553
Maximum 221825
Range 100272

1st quartile 140,686.00

Median 153,724.00
3rd quartile 190,231.00
interquartile range 49,545.00
Mode 133,660.00

2- Construct a 95% confidence interval of the mean annual salary for all salespersons.

Assumptions:
 Population is normally distributed because n= 120 ≥ 30
 Population standard deviation σ is unknown hence we will use t-distribution

Confidence interval - mean

95% confidence level

162313.89 mean
27096.68 std. dev.
120 n
1.980 t (df = 119)
4897.930 half-width
167211.820 upper confidence limit
157415.960 lower confidence limit

We are 95% confident that the average annual salary of the employees inside and outside lies
between 157,415.960 and 167,211.820 AED.
 3- Is there any significant difference due to position? Use a 0.05 level of significance

Comparing two means of independent groups:

 : mean salary of inside employees
1

 : mean salary of outside employees

2

H0 =  = 
1 2
H1 =   
1 2
Assumptions:
 Population normal because:
o N1=  ≥ 30 and N2= 60 ≥ 30
 Test variance if equal or not:
o p-value = 7.55E-09 ≈ 0 < 0.05 (α) therefore (unequal variances).
 Test statistics =
t
 
X 1  X 2   1  2 
s12 s 22

n1 n 2

t= -15.86

Hypothesis Test: Independent Groups (t-test, unequal variance)

Inside (total) Outside (total)

140,051.48 184,576.30 mean
8,974.60 19,807.34 std. dev.
60 60 n

82 df
-44,524.817 difference (Inside (total) - Outside (total))
2,807.354 standard error of difference
0 hypothesized difference

-15.86 t
1.05E-26 p-value (two-tailed)

-50,109.538 confidence interval 95.% lower

-38,940.096 confidence interval 95.% upper
5,584.721 margin of error

Conclusion: P-value= 1.04E-26 ≈ 0 < 0.05, We reject H0 and Accept H1. Hence, we can conclude that
there is a difference between the salaries of inside and outside employees.
 4- Construct a 95% confidence interval estimate of the mean salary difference for inside and
outside salespersons.

Assumptions:
 Population is normally distributed because n= 77 ≥ 30 and 107 ≥ 30
 Population standard deviation σ is unknown hence we will use t-distribution

-50,109.538 confidence interval 95.% lower

-38,940.096 confidence interval 95.% upper
5,584.721 margin of error

We are 95% confident that the difference between the mean salary of outside employees and the
mean salary of inside employees is between -50,109.53 and -38,940.09 AED.

5- Explain how your conclusion in part 3 can be derived from part 4.

In part 3 we concluded that there is a mean salary difference between outside employees and inside
employees. While the conclusion made in part 4 we explain furthermore how much is the difference
between the mean salary of inside and outside employees. The 95% C.I for the mean salary difference
between inside and outside employees, does not contain the hypothesized value (0). So, we reject Ho.

6- Is there any significant difference due to years of experience? Use a 0.05 level of
significance.

µ1 = mean salary of low years of experience

µ2 = mean salary of medium years of experience
µ3 = mean salary of high years of experience

H : = =
0 1 2 3
H : At least two means differ
1
Assumptions:
 Population is normally distributed because n ≥ 30
 Equality of variances test:
o Largest S.D = 34053.43
o Smallest S.D = 15012.65
 F-value = 7.93
 P-value= 0.0006
One factor ANOVA

Mean n Std. Dev

149,549.3 40 15,012.65 Low
171,545.5 40 34,053.43 Medium
165,846.9 40 24,248.79 High
162,313.9 120 27,096.68 Total

ANOVA
table
p-
Source SS df MS F value
Treatment 10,425,595,760.87 2 5,212,797,880.433 7.93 .0006
Error 76,947,757,842.73 117 657,673,143.955
Total 87,373,353,603.59 119

Tukey simultaneous comparison t-values (d.f. = 117)

Low High Medium
149,549.3 165,846.9 171,545.5
Low 149,549.3
High 165,846.9 2.84
Medium 171,545.5 3.84 0.99

critical values for experiment wise error rate:

0.05 2.38
0.01 2.97

 P-value = 0.0006 which is lower than 0.05 (α) therefore; We reject H0 and Accept H1.
 Hence, we conclude that the mean salaries of low, medium and high years of experience are not
the same and that at least two of the mean salaries are different.
 We use Tukey analysis to find out which means differ. At 0.05 level of significance, only Low and
High experience mean differ. With all other means equal.
 7- Give point estimates for the proportion of salespersons according to their positions.
60
p̂ 1 (sample proportion of salesperson inside) = 120 = 50%
60
p̂ 2 (sample proportion of salesperson outside) = 120 = 50%

8- Is there a difference between the proportions of inside salesperson between Low and
High experience? Use a 0.05 level of significance.

H0: P1=P2.
H1: P1≠P2.

Assumptions:

 n1 . P1 = 120(20/120) = 20 > 5
 n2 . P2 = 120(20/120) = 20 > 5
 n1 .(1- P1)= 120(1- 20/120) =100 > 5
 n2 .(1- P2)= 120(1- 20/120) = 100 > 5
pˆ1  pˆ 2
Test statistics: z 
pˆ (1  pˆ )( n1  n1 )

1 2
Z = 0.00
 P-value= 1.00

P-value= 1.00 > 0.05 (α) therefore; we accept H0 and reject H1. Hence, there is no difference
between the proportion of the salesperson inside and outside the company i.e. they are the
same.
9- Construct a 95% confidence interval of the difference in proportion of inside salespersons
between Low and High experience.

 p̂1 1  p̂1  p̂2 1  p̂2  

 p̂1  p̂2   z 2  
 n1 n2 

 Lower: -0.0944
 Upper: 0.0944
We are 95% confident that the difference between the proportion of salesperson inside the
company with a low experience and a high experience lies between -0.0944 and 0.0944.
 10- Test the significance of the relation between salesperson position and experience.

H0: “Position” and “Years of experience” are independent.

H1: “Position” and “Years of experience” are dependent

Cross-tabulation

Experience
Low Medium High Total
Inside Observed 20 20 20 60
Position Expected 20.000 20.000 20.000 60.000
Outside Observed 20 20 20 60
Expected 20.000 20.000 20.000 60.000
Total Observed 40 40 40 120
Expected 40.000 40.000 40.000 120.000

.000 chi-square
2 df
1.0000 p-value

Chi-square:
P-value = 1 > 0.05, so we don’t reject H0.
We can conclude that “Position” and “Years of experience” have no significance relation
(independent).
Conclusion
After solving all the parts of the case study, we can conclude that there is a significant difference
between the salaries of inside employees and the salaries of outside employees. In addition, we
can also determine that the mean salary of high, medium and low experiences is not the same
and there is a difference. However, we can notice that the proportion of inside employees with
low and high experience are the same.

Recommendations:
1- A larger sample size can be taken so that the results can be closer to the actual value.
2- It is great to find that the salary is not dependent on the years of experience. Salary should
not be dependent on years of experience but rather how much you contribute to the
success of the company.