Compensation Mechanism

A compensation mechanism is a way to balance or offset the effects of a change or injury, ensuring fairness or stability. In economics or social systems, it refers to actions taken to counteract negative impacts—like providing financial support to those affected by a policy or event—to maintain overall equilibrium. It ensures that when one part of a system experiences a loss or disadvantage, measures are implemented to restore balance, maintain motivation, or promote fairness, ultimately supporting the system's stability and ongoing function.