[sshumaker]

Unfortunately, you're wrong. Salary really only affects the upper limit of how much you're willing to pay an individual.

In reality, you pay an employee just enough to keep them happy. As long as they're below the threshold where they're worth the cost, that is. Better employees have a higher threshold, but not necessarily a higher salary. It all depends on what they need and demand - which only has a marginal correlation with actual value.

Speaking from experience - there have been a few times we've given raises to great employees who were already happy with the salary they were getting. It didn't have much of an effect, really - we would have been better off investing that money in a better work environment - which would have a much more positive effect on our employee happiness.