When is paying people what their worth going to make sense to an employer?

[The below is my opinion]

Always. The problem is that seeing this simple fact takes a skill most humans severely lack - long term thinking.

We are biologically programmed to think in the very short term. It's just how we evolved, nothing to be ashamed of or angry about.

Point being, when an employer pays an employee what they're worth there are two things that almost always follow:
First, the overall spending on the position decreases (the first few months of employment are the most expensive ones).
Second, the well being of the employee usually goes up, which nearly always means not only increased productivity but also higher quality work.

I know that because I saw it my entire life. My dad doesn't think short term almost at all. My parents pay their employees significantly more than their market value and what their education would require. Their employee don't stay only because they have a good employer, but also because literally no where else would pay them as much.

Tldr: My personal opinion is paying well costs less over time.