> A statistically higher salary works well for luring employees, but doesn't help much retaining them.

This is false. A high salary fixes the loyalty problem. It won't, however, fix the motivation or competence problems.

> As soon as that developer is used to his half a million take home, which takes roughly three years, he'll start looking for a new pasture.

He won't if you're paying above market rates. Especially if that salary comes with strings attached. (Bonuses, stock, etc.)