I agree wholeheartedly. The key issue there is that that's how it works after the employees earn enough for the money to no longer be an issue. The majority of people work because they have to, they need to support their family and pay the bills. If they have to constantly struggle doing that, that's pretty much the only thing in their minds. If on the other hand they earn enough as their base salary to comfortably manage that, any added income sees drastically diminishing returns. Some extra luxury, sure, but the comparison to the value of each dollar when you're barely making ends meet is huge. After you're earning enough, other things probably become more important for most people.

For example, I'd personally much rather work less hours for my current pay, than get a raise working the normal hours. Life > work, free time > money.