If we accept for a moment that there is such a thing as an optimum sweet spot in terms of bang for your public buck (which is of course highly subjective), I look at it like this:
1. Spending above this sweet spot = diminishing returns on additional service, but a good chunk of this 'extra' money ends up recirculated in the local economy. Also some invisible 'savings' like better retention, meaning lower hiring/training costs.
2. Spending below this sweet spot = reduced service + additional indirect costs or service reductions through reduced retention and employee morale. This won't happen overnight, but you are guaranteed to lose some portion of your highest quality staff & mgmt this way, which further amplifies service loss.
Of course there is a limit to all of this, but I'll always lean to option #1.
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