At least in this hypothetical example it would seem naively ineffective (not taking into account things like signaling value) to pay people more salary for same output.
Right, though I guess many would argue that by paying more you increase the output—either by attracting more productive staff or by increasing the productivity of existing staff (by allowing them to, e.g. make purchases that buy time). (My view is probably that the first of those effects is the stronger one.)
But of course the relative strength of these different considerations is tricky to work out. There is no doubt some point beyond which it is ineffective to pay staff more.
Right, though I guess many would argue that by paying more you increase the output—either by attracting more productive staff or by increasing the productivity of existing staff (by allowing them to, e.g. make purchases that buy time). (My view is probably that the first of those effects is the stronger one.)
But of course the relative strength of these different considerations is tricky to work out. There is no doubt some point beyond which it is ineffective to pay staff more.