Supposes employer A chooses to pay their employees more than other employers. Employer B chooses to pay their employees less. Both employers are selling products or services that the purchaser finds the same, i.e. they have no preference for who they buy it from.
Employer B takes the money they save by paying employees less, and invests in newer, better facilities or R&D or whatever. Now employer B is selling a better product than employer A. Who will customers choose to purchase from? Who will lose business, and end up having to fire employees?
To be a successful business, compensation decisions can't be based on people's feelings. You have to consider when a new store or hotel or restaurant will come around and put them out of business, and stay ahead of the curve. You pay what you need to to get the job done. There are some good examples like Costco, but there are only so many people with sufficient disposable income who can afford to shop at Costco and similar stores, and they're not competing with Walmart/CVS/Dollar Store or other bottom tier vendors.
Employer B takes the money they save by paying employees less, and invests in newer, better facilities or R&D or whatever. Now employer B is selling a better product than employer A. Who will customers choose to purchase from? Who will lose business, and end up having to fire employees?
To be a successful business, compensation decisions can't be based on people's feelings. You have to consider when a new store or hotel or restaurant will come around and put them out of business, and stay ahead of the curve. You pay what you need to to get the job done. There are some good examples like Costco, but there are only so many people with sufficient disposable income who can afford to shop at Costco and similar stores, and they're not competing with Walmart/CVS/Dollar Store or other bottom tier vendors.