This is a myth.
The number of candidates I interview who have side projects worth looking at or open source contributions is maybe 1-in-10 at most. Any company that requires candidates to have significant open source contributions is going to have a hard time hiring, because it’s not very common.
Really, the only time side projects are valuable is when someone needs to fill gaps in their resume. For example, if all of your prior experience was writing PHP backend code but you wanted to apply to a React front-end role, it could be helpful to have something like a React TODO app in your GitHub profile to show that you have some minimal experience with React and front-end work. You don’t need a massive open-source contribution that takes months and months of free time, just something small to show that you have some amount of experience that isn’t reflected in your resume.
The side project myth is getting out of control. Most recruiters and hiring managers will never even open your GitHub profile.