Depending on what “algebra” as an entire class actually is (I don’t know of it in that form from my Australian upbringing or from elsewhere) I can see it possibly having real benefit: abstract reasoning is one of the major things that needs to be taught to kids and has huge benefits but too often isn’t particularly taught; and algebra with all its symbolic representations and logical reasoning is excellent for that.

From your single-paragraph anecdote I don’t know the full story, of course, but it’s plausible to me that it might be not solely a case of confusing correlation and causation, but at least partly because the described effect made sense to people making the decisions, based on their broad experience in education.