Yup, voluntary redundancy was jokingly called the 'muppet retention policy' in a previous job. You announce to your staff that the company has some trouble, and allow all the bright, motivated, and in-demand folks to jump ship with a redundancy package, then you get to soldier on with everyone who's left, but now thoroughly demotivated.

The side effects of labour laws (and, to be clear, I am a big supporter or social / economic justice) can be really difficult.

This is very true. Look at the large US companies that were reluctant to have formal layoffs. They generally had near-monopoly positions, that enabled them to be lazy. (Ma Bell, I'm looking at you!)

I've seen it described as the Dead Sea Effect.

Sounds like the US Federal government lately.