And what do you think motivates people to work for you? Why not pay them nothing and only take people who are willing to work for nothing?

If your SaaS provider raises prices do you pay to move to a new SaaS provider when it is cheaper to just pay the new rate vs paying to move to a new provider? Why do you think your employees should be held to a different standard from any other vendor you do business with?

You manage a team to get work done. If someone is too expensive compared to your alternatives then sure let them go. Letting them go when they offer what you want at a price you are willing to pay is just crippling yourself for no reason. Even if you only retain someone for an extra year or two that can be a big chunk of their total tenure and that further reduces hiring and on boarding costs.

I use hiring info to keep abreast of salaries: if candidates seem to need more than I had planned to offer then I level the appropriate employees up as well. I.e. you don't have to try to get a new job just to get a raise. It means people are paid fairly (e.g. your company's cap on raises is stupid).

It's awesome that you do this even if it's not economically rational. I think you are a unicorn both in that you do this and that you manage somewhere that allows you to have that policy.

However hidden in that statement is "the appropriate employees." Odds are all your inappropriate employees are going to have to get an outside offer. If that churn is cheaper than the alternative then sure it's totally rational.