I will leave the philosophical assumptions unquestioned. What about the economic assumptions?
1) What happens if everyone follows the philosopher’s advice and
retires so long as they are below the median of the unemployed? Is
there a stable equilibrium? Yes, in equilibrium every worker with a
job must be better than the average worker without a job. This
certainly seems possible although it is hard to see how it is optimal –
can no change in wages or job assignments make it beneficial to hire
more workers? The fixity of jobs assumption is very strong.
2) More generally, if workers are
paid their marginal product and are appropriately assigned (e.g. better doctors work on harder cases) then no worker need retire. With appropriate assignment, when a below-median doctor does retire he would not be replaced by an above-median doctor. Instead, the new better doctor would be slotted in for
more difficult work, everyone else would move down slightly and the
retiring doctor would be replaced by one only marginally better.
3) What happens in general equilibrium? With flexible markets everyone gets a job so the worker who retires because he is below median is replaced by a worker from another industry. It’s no longer obvious that this is optimal.
Most generallly, comparative advantage tells us that markets find a place for even the lowest-quality workers. For the argument to apply we need a relatively fixed number of jobs, relatively fixed wages and a large reserve army to draw from. Supreme Court justices come to mind.