Question

What do Gordon and Goldin mean by the ”great compression”? When did it occur? Has it continued? Can you give a reason for both events? What are the implications that Gordon highlights in terms of productivity?

Answer 1

Solution -

The 'Great Compression' means the wages contracts which reduce income inequality. This happened in America in the 1940s. Employees' position changed due to increased real wages. This has led to the development of the economy. Actual pay is definitely related to the productive. Increased real wages increases the cost of job losses and increases labor costs per unit and companies are created to change the capital for workers, which helps in increasing the retail productivity of the workers.