Software engineers especially can take on side projects to supplement their income. Maybe a bit less focus on the day job to reflect the below market pay. Keeps things in balance.
Even got promoted to management in one of the two jobs! They would sometimes have to take calls from both jobs with one earbud in each ear connected to each laptop.
The industry the companies were in are not known for employing the best and brightest programmers... so I can understand being able to output enough to keep everyone happy. But it still boggles my mind that they never slipped up and got caught.
Most countries I worked in, anything done after hours, not using company resources, and not in the competition space of the employer is simply allowed. No company would be able to enforce that.
In fact (I have had that happen) if the contract tries to over reach, in particular regarding IP, then that clause could just be made void in court.
I work 40 hours/week at a Big-N, but if I put another 15-20 hours per week into my current job I'd get promoted extremely quickly, and get a bigger raise from that promotion than any "side project" I could come up with.
I don't want to do any of that, and moving companies is still probably the easiest way to get a large raise, but my point stands.
That'd be a very rare circumstance.
In most jobs working 15-20 hours overtime each week only gets you 15-20 hours less for living your own life, nothing else.
At all companies I've been at or have intimately known about, there have been clear guidelines for promotions and examples to look at. These are medium to large companies. FAANG and non-FAANG.
I'm sure you're right in a lot of cases, but I feel like at most software companies I'm not too far off.