Why would the government be incentivized to drive down wages? That seems fundamentally at odds with the concept of income and sales tax, which account for a very large portion of revenue that funds most programs.

In this case, "the government" actually means "rich politicians who own businesses that like paying low wages."

A senator or MP gets paid the same no matter how much taxes the government collects. The real money is in the private sector afterwards.

The government issues the cash they are only going to be concerned about how it gets used. Any of this "hurrdurr but the tax base" makes no sense.

because the doners who get people elected want lower salaries to ensure their labour costs stay low.