I think it's a pretty straightforward equilibrium. Most people, including good performers, don't want to bounce around jobs and consider it a reasonable personal cost to change their commute, learn new systems and processess, build up relationships with new colleagues, and so on. A significant portion of the labor market will bear tolerable adjustments, between barely enough not to get totally ticked off and enough to feel somewhat justly rewarded for effort. That will keep them happy and motivated and in-place, so it's rational to do it.
A smaller number of people are actively willing to take the personal cost and move around, and in a near saturated market those people end up defining the price of new labor. But paying everyone that rate would be irrational because the cost (to the business) of them moving, hiring and integrating their replacement and the opportunity costs loss, is less than what it would cost to pay everybody that rate.
Having another firm offer that you are absolutely willing to take is also the best way to get a raise where you already work, so there is also an intermediate option to handle some of the pressure of willing-to-movers without giving everybody a raise.
A smaller number of people are actively willing to take the personal cost and move around, and in a near saturated market those people end up defining the price of new labor. But paying everyone that rate would be irrational because the cost (to the business) of them moving, hiring and integrating their replacement and the opportunity costs loss, is less than what it would cost to pay everybody that rate.
Having another firm offer that you are absolutely willing to take is also the best way to get a raise where you already work, so there is also an intermediate option to handle some of the pressure of willing-to-movers without giving everybody a raise.