but I think I largely agree with you. I just look at all of those factors going hand in hand (productivity, skill levels, labor supply, etc). Ultimately productivity DOES factor into the decision to hire someone in that a business won't hire someone for $50K (living wage + benefits) if they their productivity / increased capacity will only bring in $40K of incremental revenue.

But I agree, no business looks at a worker's productivity and says "here's the threshold that I pay benefits".... so there's no direct link like that. But generally speaking, as productivity increases, so does the skill level of the employee, and so does the scarcity of that employee, and therefore so does the demand for that employees skills (relative to supply), and therefore that employee is more likely to be able to command better compensation package including benefits.