So that when you ask for a raise, they can point to all the side cash you earn and add it to your normal pay and say meaningless stuff like, "well, you're making a lot more money already than we pay people of your position."

Probably because they signed a contract where they promise that they won't do any side gigs without express permission of the employer.

> To an employer? Why? It's none of their beeswax.

I work for a municipal service. It's conflict-of-interest compliance.

In short, it absolutely is their beeswax.