I think the only issue I take with your assumption is that you will end up having more job-seekers. It could just be the case that the abusive employer's business will fail and thus create an opportunity in the market for another company to take over. If you rinse and repeat, you could assume that it would provide a force to push abusive employers out of the marketplace and replace them with more productive employees and employers.

I'll also argue that "improving their standard of living" does not have to be separate from an expansion in the economy. Often the means these irresponsible financial stewards take in "improving their standard of living" is in spending on goods and services, which continues to contribute to liquidity in the market. Not to mention that improving the standard of living for consumers is generally an overall win for society as a whole (lower crime, lower healthcare costs, higher productivity, etc.)