What if there are actually two independent markets in play but they're masquerading as one?
Everyone is captivated by Big Tech (a slightly larger, more inclusive, subset which includes FAANG) pay. There's no doubt any engineer would love to be making $250k+/year. However, this market is selecting for something very different from the larger, common, market.
We need to ask why Big Tech pay is as high as it is. I don't believe it's driven by supply and demand in the classic sense. Instead, Big Tech sees its candidate pool as "free agents" [0]. This is an important distinction if you view these free agents as a source of potential competition, either individually or signed to another "team".
What if Big Tech pay is a form of greenmail? [1] Much like sports teams -- where pay is also extremely high -- the owners are aware that they're possibly overpaying for these people to sit on the bench. However, their risk analysis tells them that the cost is worth the small loss. [2]
This, to my mind, explains why Big Tech is focused on a very specific sliver of the engineering talent pool: graduates from top 10 schools. These people tick all the boxes: young, smart, fast, energetic, and unattached (typically). With this model in my mind, Big Tech interviewing practices make perfect sense. They aren't looking for "CRUD-a-day" programmers. They're looking for those few engineers who, even under immense pressure, still rise to the occasion and perform. This signals that they could be serious competition if left alone as a free agent. Note: I'm not saying that any one of these candidates will become competition. I'm sure the probability distribution is low but it isn't zero. Unlike other fields -- where barrier to entry is extremely high -- one of these hot shots might -- once every 10 to 15 years -- pull a miracle out of the ether and disrupt Big Tech to the point of destroying them. [3]
The other market is everyone else who uses and requires software to run their business, but software isn't their business. Unfortunately, this market -- if they could get it -- would just as soon buy something off the shelf instead of hiring software engineers. It's only because such COTS doesn't yet exist that this market still requires software engineering talent.
However, unlike Big Tech, this market doesn't see engineers as competition (and, generally speaking, they aren't). This severely limits the leverage that engineers have when negotiating with these companies. Being blunt: this market is looking for factory workers who shut up, sit in the fishbowl, and do what they're told. The cheaper the better. [4]
It seems to me it benefits Big Tech to blur the differences between these markets. However, engineers need to wise up to the reality of the bifurcation and plan accordingly.
[0] https://www.collinsdictionary.com/us/dictionary/english/free...
[1] https://en.wikipedia.org/wiki/Greenmail
[2] Small loss is relative, of course. Individuals have a difficult time understanding how this math makes sense because a) the numbers are far larger than they're used to seeing and b) they can't see all of the other numbers at play which balance out the strategy.
[3] https://youtu.be/oD65g2RFSHI?t=582
[4] Yes, not every company in this market is like this. However, it's extremely difficult to know this from the outside when you're trying to find a job. You can try to pry the information from them during the interview process but this isn't always successful. My experience is that "good companies" in this market are extraordinarily rare. Plus, there is always a risk that they'll be acquired and the new overlords hate engineers.