This approach seems to only be effective if one team member significantly outperforms the rest. If a company's sprint is easily manageable, does this suggest that the team size should be reduced, potentially leading to layoffs?
To answer your question: no, it doesn't imply[1] that.
Your comments suggest you have a mental model of markets where workers should be rewarded (compensated) by the employer for their toil instead of producing value. That's bad business. It's especially bad business when the reaction is a campaign to realign the organization with an a priori interest in making sure it employs only toilers.
> If a company's sprint is easily manageable, does this suggest that the team size should be reduced, potentially leading to layoffs?
"Should" from the perspective of whom? You're running on a platform of wealth concentration for business owners. Predatory value extraction. Parasitism instead of symbiosis. <https://news.ycombinator.com/item?id=37472726>
Ignoring that, if management has so little idea what workers' output should look like that they resort to basing their assessments on how much it seems to hurt to the worker, then the business should consider focusing on management when deciding who to let go.
Or, god forbid, that it reached an optimal work/life balance for team members, while still hitting specific company targets, and should be left as is.