7. Suppose that a company has 10 employees.

It agrees to pay each worker on the basis of productivity. The individual workers’ output is 10, 14, 15, 16, 18, 19, 21, 23, 25, and 30 units, respectively. However, some of the workers complain that they are earning less than the other workers, so they appeal to management to help reduce the income inequality.

As a result, the company decides to pay each worker the same salary. However, the next time the company measures each worker’s output, they fi nd that 6, 7, 7, 8, 10, 10, 11, 11, 12, and 12 units are produced. Why did this happen? Would you recommend that the company continue the new compensation system? Explain your response.