This is just classical first order thinking gone wrong. It seems "obvious" that if all things equal, you reduce costs (by reducing wages, your highest cost) that you should get more profit. This is true. But the premise is false that affecting this one variable will allow "all things equal."
What I've noticed is that the standard businessman MBA type believes the first order thinking and gloats about how "obvious" things are (always be wary of those that claim common sense). But the really effective ones understand the coupled nature of many elements and the complexities involved. Which there's some irony because the standard MBA types also talk about Google and companies that make their employees happy with high salaries and free food. Working with humans is a complicated solution space and should be treated as such. There are certainly no universal answers and no solution works forever because the environment is constantly changing.
It is very evident that most MBA “managers” don’t understand a fundamental concept that just reducing cost doesn’t necessarily mean profitability. You have people requesting small, reasonable increments to their wages as their tenure grows. Instead of giving them that, most managers would instead prefer letting them go, spend time and money hiring someone new, who most likely will be paid the same or even more (because usually your wages stay lower if you stay in a job than if you jump around), spend time training them and still not get the same level of productivity as the person who left.
Ultimately they may end up reducing wages or saving some money on paper, but it comes at a huge cost to the company in terms of productivity and profitability.
Yeah, I don't understand why wage renormalization is such a "radical" idea. Retraining people (even if it is just to your style of work) takes time and is expensive. It is far cheaper to renormalize a current worker than to have them leave and train someone new (assuming the worker is competent). Experience, especially experience in your work's framework and culture, is valuable. Wage renormalization is also an essential practice if one wants to avoid wage discrimination.
What's odd though is that it seems MBA types understand that people leave jobs because of managers and not money, but don't see how the two correlate. Wage differentials between old hires and new hires are always seen as personal attacks from managers and I think this is perfectly reasonable. It is a signal of how you are valued. Employees are also not naive and do understand an (average) inflation of 2-3% per year and that a matching raise is equivalent to a wage reduction (more so in times like these). Wage renormalization (especially with back pay) is often a relatively cheap means of garnering employee satisfaction and increasing productivity. It can turn burned out low productive workers into hard workers. Asymmetric pay information surprisingly can (not always) cause employees to think they are being treated unfairly. Especially if they find this to be true.
But I think there is so much more and really what it comes down to is "humans are complicated. There is no universal solution within all businesses, a single type of business, a single department, or even a single team. If nuance is not actively demonstrated then malice/naivety is." The "simple solution" is that you need to recognize there is no simple solution.
Not that I disagree with the complicated nature, but there is a discernible difference between the amount of business value google can extract from an employee, versus someone changing a tire. I'm sure there has been analysis done that shows the extravagant benefits gets google more ROI from their employee hires. That would most likely not be true for other types of labor
What I've noticed is that the standard businessman MBA type believes the first order thinking and gloats about how "obvious" things are (always be wary of those that claim common sense). But the really effective ones understand the coupled nature of many elements and the complexities involved. Which there's some irony because the standard MBA types also talk about Google and companies that make their employees happy with high salaries and free food. Working with humans is a complicated solution space and should be treated as such. There are certainly no universal answers and no solution works forever because the environment is constantly changing.