It's certainly possible that you are correct. But isn't the over performance of the US economy compared to Western Europe (where they have made the kind of tradeoff you propose) evidence to the contrary?
It's evidence that the dial settings Europe uses aren't productivity-maximizing, but not evidence that "optimize for maximum individual productivity" is the productivity-maximizing strategy.
But that's not necessarily true; it's possible to imagine a scenario where you net out ahead by buying improved median productivity at the expense of reduced maximum individual productivity.
Think of it game-theoretically, assume a coordination problem that penalizes defectors (here, people who don't sacrifice their personal lives for improved productivity), and then bear in mind that some workers might be required to defect no matter what the rules of the game are.
The strategy you want obviously depends on your mix of natural cooperators vs. natural defectors.