A good point. We can tell the difference between high productivity / low wages and low productivity / low wages because the latter will tend to shed jobs on su

A good point. We can tell the difference between high productivity / low wages and low productivity / low wages because the latter will tend to shed jobs on subsidy withdrawal while the former will tend to pay more. Workers with high productivity but low wages (let's say, in an factory where the owners make a lot but the employees are easily replaceable) are still a good deal at a legislated higher price, the owners just get less of the surplus. Another way to think about it is that while productivity doesn't set wages, it represents the ceiling of what you'd be able to pay. Those marginal, low productivity, "can't afford to pay you more" jobs are what you lose when you remove subsidies (or increase minimum wage). Hence, subsidies targeted at low wage earners disproportionately incent low productivity labour.