One thing that seems to be missing from this discussion is employee performance. In my experience, well functioning organizations go out of their way to retain top performers (with better pay raises, bonuses, equity, project opportunities, etc).

Average performers are valued but replaceable. They probably will see nominal raises over time. Minimum effort performers are just a drag on the team, as they occupy a spot that might go to a better performer.

While it costs to hire and train someone new, you also get new ideas and possibly someone better than average (if the company has a good hiring process).