Employers want to pay the minimum, clearly, but until a person’s salary exceeds the value they bring to a firm, there will be other firms willing to pay more and attract that talent. So provides some upward pressure on wages, which the author addresses:

> Economists will teach you something called the Marginal Productivity Theory of Wages, the idea being that the amount of money that a company is willing to spend on an employee is essentially the value that the company expects to get out of their work. This strikes me as mostly true, most of the time, and likely to be the case in the corporate world that we’re considering here.

> but until a person’s salary exceeds the value they bring to a firm, there will be other firms willing to pay more and attract that talent

This is false. Supply and demand is a factor. I could clean the toilets at the office, if janitors were in short supply my boss might setup a rotation schedule - nobody wants to but it must be done and so he would pay me. However because janitors are cheaper than me he doesn't. This isn't just theoretical - McDonald's mostly has the crew clean the floors - janitors make more money than McDonalds crew.

"provides upward pressure on wages" is true, but you simply can't get from there to actually demonstrating the "marginal producivity theory of wages".

It is pretty clear that the employment market suffers from severe inefficiency and information asymmetry. It takes a pretty bad economist to look at a market like that and think that its pricing is accurate.

Employees often don't know how much value they bring and thus are severly limited as counter party and other companies have a hard time predicting how much value you'll be able to add for the. These (plus many other factors) mean that you should expect significant mismatches between pay and performance.

Edit: None of this is evidence against performance being a paretor distribution (which makes sense to me), but we're gonna need more than just pay data to determine that.

There’s a “marriage problem” element not covered here. The marginal value of an employee is higher if the team they join is small. Eventually, the team reaches a size where more employees add little value. Most people understand this. However, it follows that the marginal productivity theory of wages gets more complicated. They might not be willing to pay you the full value they get from your work, for example, because they might suspect a replacement (e.g., keeping team size constant) would likely produce higher value. Or, they might pay you much closer to the full value of your work than others because they fear a replacement would likely bring lower value.

Two problems with this are 1. It is very difficult for outside employers to tell is someone is a high performer, and 2. Economists also teach to always think on the margins. A employees value isnt the amount you bring in more than if they didnt exist, it's the amount they bring in over a replacement. If people are willing to replace you for $5/hr even if you make the company $100/hr you wont get anywhere near that amount.

> there will be other firms willing to pay more and attract that talent.

...marginally more. Still nowhere near the actual value their labor brings in. We simply don't have a competitive enough employer market to provide the upward wage pressure that would be sufficient to pay people fairly.