I kind of see that, but it completely ignores the cost of hiring (financial and in lost productivity in the team that has to onboard the new hire) and the loss of knowledge and experience from firing as well.
What it is good for in my view is making managers look and feel tough and establishing a culture of fear that is so necessary for hierarchical power structures. Power/status hierarchies are a common trait for most primates. So my shorthand for this sort of it-doesn't-make-sense situation is, "Primates gonna prime."
Not defending, just explaining.