I wouldn't say it is for every company, but I'm betting they've done a cost/benefit analysis. It allows them to spend less money in the long run by focusing their spending efforts.

The cost to lose employees and replace them with higher paid talent is more cost effective than spending money to retain current talent. Figure with job inertia and just straight up employee psychology, they can keep existing employees marginally happy and deal with the outliers.

Personally, I've seen companies that do it both ways. I had a previous company that tried to get as much talent as possible and just churn through employees that all left once they saw their value. And, you could try to counter offer the valuable ones or just move on and burn through more employees. My current company stresses market adjustments and comp increases to keep current talent as much as possible because they don't want to deal with the time lag needed to bring new people in as replacement.

The second company is way more enjoyable to work for.