Effectively they're rewarding employees for interviewing with other companies. What about the equally-valuable employees who are very happy with their jobs and don't choose to interview? Won't they become a little less happy, once they know they're making less than the guy who was a little unhappy and chose to interview?

I've spent quite a bit of time as a manager at some larger tech companies. We'd monitor turnover and adjust our compensation policies, and other policies that affected satisfaction, across the board if there was an increasing trend in turnover. Sure, we'd make a diving catch every once in a while when we didn't keep a close enough eye on one of our top developer's satisfaction. In those cases we'd still look at our overall package.

When we made adjustments, the really good, happy engineers were even happier when they got nice raises without even asking for one. Now, by across the board, I don't mean that every engineer gets a good raise. That's because as a company gets larger, they get more and more mediocre engineers. The article doesn't say that Google gives big counter offers to every engineer. I assume Google is smart enough not to do that. It's not possible that all of their engineers are really good. Sometimes good-bye is good riddance.