You're quite literally asking a billion dollar question. And a deeply-rooted reason on why the larger job market was so easy to break. Feed into that distrust, and no one gets hired, at all. Though the difference is that a reasonable company can bear a bad hire for a few months (or years) and not be in the red. You probably cannot.

So there's no "good" answer. But "what people actually do"? Ask people they know and trust already, or indirectly know. or give chances to relatives and people they care about. So we just reverse engineered referrals and nepotism.

After that:

- look at a resume/portfolio and then have a short talk with them to validate that. Maybe a small trial/test (We just reverse engineered interviews).

- Maybe go through a middleman to do that work for you (we reverse engineered recruiting companies).

- Maybe we have some middleman site where other previous clients can rate the potential hire on their work (we just reverse engineered fiverr/upwork/other freelancing job matchers).

- At some point, you look for other organizations or institutions that test and ensure some level of quality with any potential candidate (we reverse engineered licenses/certifications/accreditation).

None of this is novel, and not a very satisfying answer. But I'm just listing the very logical path towards solving these problems, and how easy it is to come into what already happens today. The solution isn't easy, and I think at some point it just comes down to "do the above, but actually good". Because as you said, there is no true incentive for any of the later parts of this chain to be the best recruiter or best examination. There needs to be some trust or the whole thing falls apart.