I was reading the Wall Street Journal and I read an extremely interesting explanation about wages from Henry Hazlit's book, "Economics in one lesson". Greed, i.e. competition, is what makes wages rise. Generally speaking compensation is based on productivity, the more some one produces the more they get paid. The counter intuitive aspect of this is: why would you pay someone who is more productive not because they are any smarter or work any harder but press a button on some piece of machinery? It almost seems unfair that a guy who works for someone else should take advantage of the capital investment of their employer. That person didn't invest in any capital, they just sit there and utilize the machinery and tools given to them. Yet, these people make more money then those that don't have the capital to improve their productivity.
What is the most you are willing to pay someone? The right answer is that you are willing to pay them anything less than the revenue they generate. You won't pay them anymore money than they generate because you will go out of business, but anything less is acceptable. So the question is, in a competitive market what will that salary be? Well, it will tend to be just underneath the value added by that employee. Let's say you pay someone 1 dollar an hour and that person is generating 10 dollars an hour what will happen? A greedy entrepreneur will see the 9 dollars an hour in profit and say, hey I'll take 5 dollars a hour in profit. This will continue until the wages can't go any higher. The important thing to note is that the amount someone would be willing to pay is independent of how that revenue is generated. Some greedy guy is always out there willing to pay a button pusher if it makes him an acceptable profit.