Wage compression is closely associated with a high degree of co-ordination in wage setting, which pushes up wages in low-productivity firms, forcing them to improve, scale down and shed workers or go out of business. Central wage setting also keeps down wages in high-productivity firms, enhancing their incentives to invest in human capital and technology, as firm-level productivity gains do not directly translate into higher wages (Moene and Wallerstein, 2006). However, the compressed wage distribution also comes with disadvantages (discussed later in the chapter), as private payoffs do not always provide sufficient incentives for individuals to make the educational and career choices that would benefit society the most, and low-skilled individuals struggle to integrate into the labour market.