Comment by thayne

> What's the "salient feature" that's missing?

Multiple products. Multiple employers. A currency distinct from a consumable product.

A simplified model could be useful, but yours goes too far.

It doesn't take into account effects like that by paying more you can attract more, and more productive workers. Or that it puts pressure on other employers to increase wages.

> but can't articulate where the actual growth is coming from

I am not an economist, but I think one situation where this works is where you are competing for workers with other employers that have high margins, and pay their workers relatively little. In that case one of two things happens. Either other employers also increase wages, leading to their workers also having more money, which they can spend on your product, or they don't compete on wages, and you can outcompete them in getting the best workers.

The key is that total productivity doesn't necessarily improve, but wealth distribution becomes more equitable.