I have also wondered about the arms race and how it weighs against market forces for the bar going up, especially because as founder of an interview prep platform, I am complicit in said arms race and don't feel great about it (though I think the good of starting interviewing.io far outweighs the bad, but that's a story for another time).
So I looked at the data.
Between 2015 and the first half of 2022, I'd argue that "the bar" was about the same, even though a bunch of interview prep resources sprung up during that time (interviewing.io was founded in 2015, Leetcode was, Pramp was, Triplebyte was, HackerRank was a few years earlier, the list goes on).
Then, the tech downturn happened in 2022, and all of a sudden the bar jumped... because for the first time companies didn't feel like there was an acute shortage of candidates.
Here's some the data about the bar. At interviewing.io, after each interview, whether it's mock or real, the interviewer fills out a rubric. The rubric asks whether you'd move the candidate forward and also asks to rate them on a scale of 1 to 4 on coding ability, problem solving ability, and communication.
We can look at what the average coding score was over time for passing interviews to see how much the bar has gone up.
Between 2016 and 2022, the bar grew a bit (from 3.3 to 3.4). Starting in 2022, it shot up to 3.7. Is this the be-all and end-all? Of course not. But to me this is compelling data that market forces >>> the interview prep industry.