The smart companies have usually paid mediocre wages but provided happy perks, e.g. gym memberships, table football machines, beanbag chairs, whatever. Happiness can often be bought for less by providing stuff instead of money. Pay rises make people happy for a month, after that they just feel entitled to get that amount for ever and have no gratitude. I very much doubt that you'd get 20% more work done by paying 20% more.Or maybe even made better money and profits because of the better workforce
Pay normally only goes up if people leave to work elsewhere, or if they can't recruit good enough newbies, i.e. supply and demand. It happened where I worked once, big competitor moved into town, people started having mysterious one-off days off then quitting two weeks later, shortly after that a big pay rise all round.