Is the cost of kid gloves out weight the cost of bringing in a new engineer that you don't know their failings at all. The devil you know is manageable, the devil you dont is a gamble. How much upside is in that gamble.
It's definitely related to the cost of hiring and the cost of the employees. But it can work against the employees in the long run because they learn they can get away with bad behaviour and it gets normalised. Then it's hard to genuinely improve, so acts as an invisible barrier to their career growth (or worse, doesn't, and that demotivates the others).