I can't say much for full time employees, but I've heard the exact opposite for interns. The Google interns I've spoken with all said Google was their best offer as far as compensation goes.
I got internship and full time SWE jobs at Google. They're competitive. About the same as Microsoft (though, they have better insurance and different tax situation), I'd say pay is comparable (I am getting quite a bit of income out of the food lets say). All in the last two years.
Turns out they rely on the "but we're GOOGLE!" schtick a lot when hiring.