Definitely. And it should also be noted that the work in the story is seasonal. I'm not sure that the incessant competition in this performance-pay model would be entirely conducive to retaining staff long-term. However, this may not be a big problem with unskilled industries where staff turnover is high anyway.
Yes. The seasonal thing is central. Important assumptions here are basically:
A - Workers have no incentive not to screw the employer.
B - Employing/Retaining staff's not an issue. This is also part of the seasonal work. It's not worth looking for a different job when it's only a couple of weeks.
If this were a more perfect market (infinite time, perfectly informed participants ...), the decreasing marginal rates (to avoid being over generous), would disappear. You'd be better off pinching your neighbour's picker that picks twice 2x fruit with 2 X minimum wage then keeping you 0.9x picker at 1 X minimum wage.
