It's very definitely a pay issue. It's also a hiring issue: most of Silicon Valley deliberately makes it as difficult as possible to pass the hiring bar.
There is one company with whom I've interviewed once, gotten an offer, and then been rejected when I applied later in a separate round after a year and a half doing other things. There's another company where I interviewed once, got an offer, did something else, interviewed later, got rejected, was recommended for an internship later, got put through such a bureaucratic fuck-up that I didn't even receive a technical interview before they'd selected interns for all their slots for the year, and they still regularly try to recruit me every few months (including this past month), despite my being a grad-student right now. Then there's a third company that keeps continually sending recruiters my way every so often despite rejecting me with no reason given every single time.
I'm not naming names, but these are big, famous companies. Literally everyone on this entire board knows these companies and "knows" about their absolutely ravening hunger for engineers, "knows" about their six-figure offers for new college grads (I never got one of those, but I graduated in 2011).
If these are the recruiting, filtering, and hiring practices at three of the world's largest technology companies, then I have to declare, fuck it, there's no shortage of "talent", aka: skilled labor. There's a shortage of top-5% skilled labor willing to jump through the right hoops, with the right Luck Bonus stat on their character sheet to get through the outright random filters, who are willing to take the salaries on offer after all the crap they just went through to find a job.
By contrast, I'll tell you how I found my (No evil eye /spits!) internship for this summer. I checked the "Who's Hiring" thread on Hacker News for interesting internship positions, sent a bunch of cover letters, had one Skype interview with the CTO of a very nice company, received the initial offer, negotiated a bit (nothing too heavy, it's an internship after all, but a slightly nicer deal on tax status and travel expense), and accepted the offer. As far as I can tell (again, No evil eye /spits!), they're a very nice company doing highly interesting work that could even potentially inspire me towards new research directions in my grad work, and I'll be pretty glad to spend my summer vacation with them.
And at no point whatsoever did I have to recite the definition of a red-black tree, figure out how to jump out of a spinning blender when I've been miniaturized, or solve an Advanced Algorithms exam problem.