Do you not see any reason why a company might prefer to be in the second category?
This is great if you're an employer but what are the consequences of shifting from a capitalist economy to a capitalist society? There is more to a successful society than increasingly desperate and ruthless competition for a shrinking pool of jobs. How many people want to spend their entire working life in a cage match for survival hoping that they are one of the lucky few who make to the billionaire's club? If government isn't going to represent the people what's the point of having one?
The standard retort from market fundamentalists (and it is a faith) is to reframe the debate as capitalism vs. socialism, or argue that the market is as natural as breathing and we have to let it do what it must. The first one is straw man argument; not many people are arguing in favor of a Marxist paradise. And the market as a system of nature is simply delusional. A market economy is fine, most people agree on that. The problem is when the market model invades every last aspect of society and opposition is neither mon-existant or rendered impotent. The end result is a dictatorship of market fundamentalism. Kind of a capitalist version of the Soviet Union where the Communist Party is replaced by oligarchs and the lowly worker is replaced by the lowly worker version 2.0. IOW, post-industrial feudalism. Is that what "the people" want? Something tells the answer is "no, they absolutely do not."
The 2nd company doesn't have to bear the costs for training.
>If you're in that category you'll be trying to hire employees for the same salary they're already being paid by an (intelligently run) company,
For the first company, it doesn't matter how much they (intelligently) increases the salary because they still have to add in the expense of the training.
>, in addition to having to retrain them for your company.
Not necessarily. A common example would be IT consultants. It is very common for Oracle and SAP have their consultants spend 4 to 8 weeks of training and then boutique firms would poach them with higher salaries. The boutique firms didn't have to pay the $20k to $40k for the 8 weeks of classes and they also don't have to retrain them. The Oracle DBAs' skills are ready to be put to use on day 1.
If one thinks Oracle/SAP can simply increase the salary to what the boutique firm was offering, the math doesn't always work out because the total higher compensation has to include the training they already paid.
If we use following placeholders:
s=salary, t=training, i=increase to market salary rate
Category 1 company total expense = s+t+i
Category 2 company total expense = s+i
Because "t" was a non-zero amount that can't be magically erased, it means that for all values of "i", "s+t+i > s+i"
In other words, for Category 1 company to "match" a higher Company 2 salary, they must always pay more than that salary because the "pay more" includes the training $$$ they paid.
Hopefully, for Company 1, they have other non-monetary advantages that outweighs the absolute mathematical disadvantage the above equation shows.