That's just not accurate. I've seen these systems run at multiple companies, and in every case they had a lot to do with skills and experience. It's true that they're not a perfect classification, and I think it's defensible that some people prefer a system where this kind of leveling doesn't happen.

But the tradeoff is that career advancement becomes less legible in a way that other people often find frustrating. Why does Alice get paid 3 times as much as me to work on cooler and more important stuff? "Alice is L7 and I'm L4" is often an easier answer to accept than "Alice is a better engineer than I am" or "People with Alice's experience have more options than I do".