Additionally: People will work hard because if someone is going to be fired, they don't want it to be them. This assumption that they would do the bare minimum assumes they will keep the job no matter what they do. That's not true. That is not even considering things like the possibility for promotion if you stand out above your peers, the possibility for changing jobs within the company, or the possibility for getting a good recommendation if you apply for a job outside the company.
And in situations where it is true, e.g. working for the government, or in unionized jobs, that's exactly what they do do. Hard work won't even get you a promotion if it's done on seniority.
