I don't mean this to be incendiary, but, do you think perhaps this reflects on your recruitment pipeline, the standards you hold interviewees during the discussions about their experience, and the way you review resumes?
There is of course a possibility that someone has rehearsed their interview happy path down to the word and they can easily describe complex technical concepts without understanding them because they're quoting a script, but an interview that can be gamed in such a way may highlight a problem with the interview.
If most of your interviewees are failing to write basic code, the issue probably isn't the applicants.
I've had a very similar experience to this, these are literally with candidates that are extremely "over qualified" based on their resumes. We're talking masters degrees, doctorate degrees, etc. They can talk like they have years and years of experiance at this place, that place, you ask about projects they'll dive into high level details about them, everything sounds good (can still filter 80% out with these questions to be fair). Get to the code question, boom fail.
I dislike leet code, but you do need to be able to code something (Even if it's syntactically incorrect) on the fly and reason with me about what and why you're doing something.
For starters having a masters or PhD implies _less_ programming experience, generally speaking. Its a huge plus for a variety of positions but IME PhD or masters candidates were always a little more raw engineering wise. The way you get good at coding solutions quiclky and on the spot is by writing a lot of code.
Particularly PhDs in Math, EE, or areas of CS that aren't engineering heavy. You hire them to solve problems that your engineers can't solve, not (just) to write code.
Masters degrees are a total crap shoot. I honestly ignore them entirely unless there's a thesis.
Not incendiary at all. I've been worried about that, but as we've adopted more skills assessments, the quality of hires has went way up as measured by first year retention. We're not losing people because they can't do the job.
There is of course a possibility that someone has rehearsed their interview happy path down to the word and they can easily describe complex technical concepts without understanding them because they're quoting a script, but an interview that can be gamed in such a way may highlight a problem with the interview.
If most of your interviewees are failing to write basic code, the issue probably isn't the applicants.