since all apps are designed to run well on budget phones from 5 years ago, there's no reason to upgrade.

5 years, maybe, but any more is stretching it. And not getting system upgrades anymore is problematic. Unless you own a particular model of phone, de-Googled Android can be hard to come by.

For example, I have a 7-year old Pixel C. By the time Google stopped using system updates for it, I wasn't wanting them as every release made the device slower and more unstable. After some effort, I was finally able to install a version of Lineage, which itself has problems including no updates in years. There's a lot of software that is incompatible with my device, both from Aurora and FDroid.

Android isn't Linux; Google doesn't care about maintaining backward compatability on old devices, much less performance, and there's no army of engineers making sure it is because there's a served running in walled-up closet no one can find.

Google deprecates features and ABIs in Android, apps update and suddenly aren't backwards compatible.

5 years, maybe. The entire industry is addicted to users upgrading their phones, and everyone gets a piece of that pie. There's no actors, except perhaps app developers, who have any interest in keeping old phones running. Telecoms upgrade their wireless network - the internet connection in my 8 y/o car, and half its navigation features, died the day AT&T decided to stop supporting 3G; Phone makers make no money if you don't buy new phones; and maintaining backwards compatibility costs Google money which they'd rather siphon off to shareholders.