I would ascribe it to a different form of bad management. Lets say you have 10 first class applications graduated for every first class level job. There are immense value judgments to be made, but from a lazy manager perspective its much less psychically painful to just reward the guy who works the longest hours or has the worst stockholm syndrome (as this guy clearly has, because someone's getting a reward for his excessive work and it isn't him...)
Things are always going to get weird when the supply is too large compared to the demand.
If the average PHD creates 4 new PHDs in his lifetime, then all four are in deep trouble unless three extra jobs are created for them to sit in. What, you say the number of jobs is shrinking? Whoops. Life's going to suck for all four.
Peter principle??