Not if all the employees do it.

Not everyone has the temperament to slack. I don't enjoy "phoning it in" and will work on things (including overworking) to accomplish results, even if others aren't carrying their weight.

If you build an org like this, the inevitable outcome is all the top performers leave (as they're tired of covering for low performers) and eventually nothing gets done at all.

Indeed. A single unsatisfied employee will break an entire company's morale over time. It's beneficial for companies to ensure that everyone is well-paid, unstressed, and isn't on the path to burnout. Most companies don't see it.