"By paying [the developers] 20 percent more, you often find that you've hired someone twice as productive. It's been estimated that the best developers are almost 25 times as productive as the worst developers."
From my experience, I fully agree. A very good developer with a powerful toolset can do wonders. That's why I'm skeptical on putting too much value on the infrastructure (ALM and so on, which is relevant but not an absolute) and than looking for the cheapest programmers around.
Also (and I know I'm biased because I do this for a living) a well-trained programmers (books and training classes come to mind) can be much more productive and pay off the training investment in a very short time.