My anecdote - at a former big tech company, we had a long hiring freeze, and they even decided that when someone leaves or gets fired, their headcount goes back up to senior leadership who decide where that headcount should be (so as a manager, if you fire someone - you might lose the position entirely).
So, naturally, even since then there have been zero people fired, even if they are low performers, since managers want to keep their headcount. But talented people obviously still get offers and leave, and when they leave, their headcount disappears.
So after a year or so of this great policy, the average level of talent across the company is steadily dropping, which also means it'll be much harder to recruit top talent even after this policy is over - because most talented people want to join a team where they can still learn and evolve, collaborate with other smart folks, etc.