What surprises me is that plenty of engineers have remarked how a basic knowledge of algorithms and data structures has been the key to getting hired, rather than the ability to write good code or solve problems that are similar to the ones a candidate would actually have to solve. Those are not tested in interviews.

Given that background, given that people are trying to improve the recruiting of engineers, given the penalty applied to people who recruit for the standard package, given the rewards for those who recruit accurately to their needs, .... why does the "irrationality" persist?