But this doesn't match reality. The surplus of labor has allowed big tech to be exceedingly picky during the interview process. You will now fail interviews if you're unable to solve two Leetcode Hards in 45 minutes.

If there was insufficient labor pool as you suggest, interviews would become less selective and wages would rise.

Tech interviewing has been dysfunctional for a long time, but yes it is much worse now because the tech job market is terrible. However I have previously commented (along with citations where possible) about how this job market is deliberately depressed. BigTech has achieved this through a few mechanisms, namely a) increasingly offshoring jobs while simultaneously b) freezing headcount in the US, and c) performing significant layoffs triggered by Elon's shenanigans at Twitter. And a highly under-reported aspect of all this is that these layoffs are causing much higher pressure on the remaining employees, which is leading to record levels of burnouts.

I'm letting my cynicism show here, but I think this is a power move by the capital class to show labor their place after an exceptionally strong labor market during ZIRP. This is much more recent and not related to the H1B program.