I think the idea is that low pay actively excludes many high-achiever types who are capable of making much more money in the private sector--without gambling their lives. You cannot recruit the best and brightest unless you can pay a competitive salary.

Paying more doesn't guarantee 'higher quality' but it sure helps.

That is a very unusual speculation. Do lower paid people have less compassion? Do high school teachers have worse understanding and appreciation of ethics and morality than bankers?