It’s not just about treating current employees well. It’s also about offering enough at the hiring stage to attract more good workers. Higher starting pay and a better reputation as a place to work means more people applying, means that Methface Matt can’t compete with TypeA Teresa to get hired in the first place.
People lie in their interviews all the time. The amount of conversations I’ve had with my boss regarding people he’s hired that turned out be idiots that have started with “I don’t know what happened with that dude, he seemed totally normal in the hiring process”. We’re also restricted in what questions we can ask during interviews because asking people probing questions is apparently not fair according to our HR dept which makes it pretty easy for them to BS their way in. Then we’re stuck with their dumb asses for months before HR lets us fire them.