There has always been this argument that allowing H1bs to switch jobs easily and clearing the green card backlog for India will increase labor liquidity in the market which may in turn result in higher wages for local and foreign population.

Employers don't want this. Policymakers also don't want this because higher wages (for everyone) may put inflation pressure. Instead, the middle ground is to have employers have their way by having hostage labor, while at the same time, keep spreading hate for H1bs so that local population doesn't feels alienated by policymakers.