I think you and most of the other commenters here are analyzing this correctly, but from a very different perspective than me - I've only worked at small companies (less than ~80 people) at varying levels (Junior Eng, Senior Eng, Founder), but in my experience at these companies, you solve the retention problem by giving engineers things to work on that they /actually/ want to work on, hiring people who are not strongly motivated by money, and doing work as a company that is ethical and progresses the world.

At least half of my coworkers could move over to a similar position at a FAANG with no difficulty and make over double what they are now, but I have no doubt in my mind that if any of them did that, it would not be for compensation.