High salaries come with high expectations. If you're getting paid a lot, expect to work a lot, too. If a good work/life balance were free, everyone would have it. It has a definite opportunity cost.
I have yet to see an instance where salary scaled 1:1 with time put in. Where I used to work, the people that busted their asses for 50+ hours week in and week out, showing they were "team players", might get a 6% raise at review time instead of a 2% raise for a strict 8-5 engineer. They might also get a few thousand in extra bonuses, if their department has funding for them. After a while they might get to the point where they were making enough extra to justify the effort, but "a while" could be 10 years or more.
Note that I am specifically avoiding any discussion of non-monetary considerations and that my analysis sounds rather mercenary. I am specifically trying to address the issue of engineers making more money for being expected to put in more effort. Discussion of the non-monetary considerations could be a lengthy tangent on its own.
Agreed, and I also have yet to see an instance where productivity scaled 1:1 with time put in. So, it works out. :)
Suppose you start at $80k and work at the company for 5 years. After five years the strict 8-5 eng in your example is making $87k--barely keeping up with inflation--and the hard worker is making $101k. The total compensation difference over 5 years is $35k.
Unfortunately, real world compensation schemes often don't even work out as well as your example...
Working an extra 20% so that you are paid appropriately larger salary 19 years down the line is not a terrible choice if you really need the money. It is also possible you will earn true grade improvement along the way and get a one time additional bump of 5% for your effort.
Of course, if we reverse the equation, things might look differently. I have about 3 potential free hour per workday and 12 free hours per weekend day, for a net 39 hours of "my own time", earned by showing up to work. Giving 10 hours of those to the employer is a "pay cut" of 25%.
The market doesn't work as efficiently as you imagine it does, nor could it since companies do all they can to hide what salaries actually are (i.e. imagine trying to buy fruit when nothing had prices, no one would tell you what they paid, and you had to negotiate in private for what they cost you).
In order to get the best of both worlds (reasonable hours and high pay) as an employee, you not only need to be a top-notch employee, but you also need to find a top-notch company to work for. Middling employers will either underpay you or overwork you, and the worst employers will do both.