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In recent years, many plants have closed, forcing thousands of workers out of their jobs and into new ones. Studies of job loss suffered by these displaced workers find that among groups of workers with exactly the same skills and types of training, workers who had been with the firm for many years and were in 55-64 age range had greater wage losses than those in the 25 - 34 age range. How can a compensation scheme designed to enhance worker motivation lead to this result?

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