There is a shortage of high quality applicants because of people fleeing tech jobs, and the ones remaining can therefore be more choosy. Job satisfaction (and therefore whether anyone will consider your company) is driven by many things - salary, working conditions, location of the employer (city/state), benefits, coworkers, coolness of projects, room for advancement, job training/re-retraining, flexibility in hours/hands off management, and long term stability or viability of your company. I'll consider lower pay for a job that gives me flexible hours, is laid back, M-F only, and doesn't try to kill me. My social life is important to me, so non-24X7 environments are better. Happiness is not directly proportional to salary, but short term, that's what people think, until they realize they sold out, and have had enough. If your pay scale is low, you need to have other advantages to attract good employees, so emphasize the other things in the list you DO have. Last year I took a new job that paid 30% more, but I found later was misrepresented by the management and recruiters... the company was constantly advertising... when I finally hired on, months after the initial interview, my boss had been 're-orged' the day before, along with HIS manager, and I asked the temp manager as to what the hours were on average, and he said currently it was 12-13 hour days - this because they were grossly understaffed and management would not let them have reqs due to re-orgs (for over a year!!!)... this was a salary job. Even though the salary was 15K more than my old position, factoring in extra hours, I was making $3 less an hour. I left that day and headed back to my old position (they didn't want me to leave) and they threw in a 20% pay increase, which didn't quite match the other job, but beat the heck out of 60-65 hour work weeks and the instability of re-orgs.

Finally, don't overstate your requirements. If you don't really need a superstar, then don't hire one. Too many firms do this, and the employee is bored in the position, and will be a flight risk. The person might be ok with being overqualified if the salary is stellar, and the company is good to work for, but many times, that 'average' employee you overlooked will bust his a$$ for you, and is completely capable of doing what you want.