You don't pay as much to retain an employee as you do to hire one. If your employee feels like they're earning 5-10% below market rate, it's probably far less likely that they'll want to find another job than if you pay them 25%+ below market rate. There is a cost and a risk to switching jobs, and most established people at the company won't jump ship due to a discrepancy as small as this. So, the upside is that you get to train people and pay them at a slight discount, as opposed to having to put up a higher senior pay offer to attract someone willing to do the job.
Though, as a current new grad, the desperation market is setting in. I am open to getting paid basically anything a person can survive on where I live to just gain more experience, and many other people are in the exact same situation. The junior market's demands will keep going down until either the benefit of employing us becomes large enough for companies, or until we all leave.
