It follows from the wages being allocated from a relatively fixed pool of available money. What people think they are worth can be significantly different than what they are empirically worth, both high and low. There is some price discovery that needs to happen at the individual level.

When wages are opaque, an employee only needs to justify their worth to the employer. Employers pay for value net of wages, so they are often happy to pay someone much more if the individual value generated justifies it. When wages are transparent, an employee needs to justify their worth to everyone else because a higher wage is tacitly reducing their wage. This creates social pressure separate from the economic argument.

Other employees are incentivized to maximize their own wages regardless if it maximizes value for the employer. And there are many more average employees than high performers. Employers can leverage this social pressure to cram down the wages of anyone who wants to be paid above average because they no longer have to defend a lower wage on a purely economic basis. Empirically, this is what happens.

Anecdotally, I've seen this play out countless times at companies.