Or they're paid more, because their neighbour is a good worker, and too nice to ask for anything. Meanwhile Mr. Jerkface next door is a very mediocre, unreliable character, and is still difficult to let go, so he gets paid more, because he always asks for more more money.

Dynamic pay doesn't always reward the very best, and certainly not proportionally. It also rewards the person the boss likes, well connected people, and people that are just more skilled at gaming the system.