Getting my current job was a hoot-- I think the only time that I've ever been asked in an interview what I was paid at my previous employer. Moving from CO to KY was the only reason for my job search- when I told them what I made in CO, I was honest with them. I got the "cost of living is lower here" argument (a poor one), they can't do any better. I have to put food on the table, so I took a decent loss by taking the job. I continued my job search and 6 weeks later landed one that paid better than what I was making in CO. I gave my 14 days notice and they asked me what I was going to make at the prospective employer. Then too, I was honest. They asked to match, I responded that I already committed. A day before my 14 days was up they offered about $5k annual over the prospective employer. That and better benefits made for an easy decision to stay.
I just don't understand the wage argument up front. If they paid me what I wanted to begin with (comparable to CO), I wouldn't have kept looking, and they would have saved money on my salary by not having to up-salary the next guy.
It's a pointless argument. If you're looking for a position where anyone with a pulse can do the job function, use a temp-agency. That way you can weed out the dead-beats, druggies and no-shows. If you need someone with actual talent, it's easy to implement some sort of skills test as part of the interview. Use that as a starting point, if someone qualified demands more than the job allows, keep looking. If they lack the skills or talent, keep looking.