> Is the employer incentivized to hire people even at a relatively high wage

That doesn't matter in that particular theory (I'm not a marxist, just explaining). The employees are always exploited like a natural resource.

> Company towns were bad, and small rural towns with only one big employer also exhibit similar problems.

Well the funny thing is Marx advocated for that in the Communist Manifesto. He might have been a good philosopher but the solutions he proposed weren't very successful.