This is a very valid point. While I don't have all the answers, but it seems like if a person is pulling an honest 40 hour week they should afford at the very least a real minimum standard of living, regardless of what that person does. I know this sounds hairy and anti-capitalist and "who is going to pay for this", etc. But this is what real value is in my opinion.
If you choose to dedicate the bulk of your waking life to creating wealth for your employer, you should be compensated, at a minimum, well enough to feed, clothe and house yourself.
or there should be something like UBI in place to allow employers to decouple the cost of keeping their employees alive from the cost of doing business.
How does that change if 100m people want to live in a city that realistically houses 10m?
A bit of an unrealistic scenario, but my city has a very low vacancy rate, and you can't live there on minimum wage / just above. There are just too many people making more money.
The point of this example is that making paper hats creates little to no wealth. No one is going to compensate you handsomely for whatever random activity you choose - there has to be demand.
A living wage, or even minimum wage, isn't being "compensated handsomely," it's being compensated at least enough to survive.
If having someone make paper hats 40 hours a week is a bad business model, that's not the employee's concern. Why should the person running the paper hat making business expect to make a living at it, but not the person making the hats?
