> mistakes: the first is they assume employees are (or should be) paid according to how much they "individually" earned the company

From the article:

  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

  The marginal productivity theory of wages states that under perfect competition, workers of the same skill and efficiency will earn a wage equal to the value of their marginal product. The marginal product is the additional output from employing one more worker while keeping other factors constant. However, the theory has limitations as it assumes perfect competition, homogeneous labor, and other unrealistic conditions. In reality, competition is imperfect, labor is not perfectly mobile, and other factors like capital and management efficiency affect productivity.

> The marginal argument is confusing to me.

When economists say “marginal” they usually mean what an engineer would call “derivative”. So “marginal cost”, for example, is usually “d(cost)/d(production)” or “d(cost)/d(sales)”. Similarly, marginal productivity means “d(productivity)/d(workers)”.

Usually this pops up in ideal economics because under ideal circumstances, maximizing revenue and productivity and so on means “set the derivative of something to zero” to find the optimum point.

(Disclaimer: I’m a physicist not an economist, but I’ve taken an intro economics course. The above was my main takeaway from that…)