I think that argument is going from one extreme to the other. There are obvious hardware improvements there, too.
Many don't argue that the new iPhones aren't better, it's just the $ amount or margin of "better", for an individual to justify an upgrade.
So technically, a XS Max is better than a 7 Plus, more from a hardware standpoint. Much higher contrast ratio, better processor, dual SIM, better camera, a bigger screen in a slightly smaller body size, etc. These differences may not matter to some, and matter to others, but functionally you can do much of the same things on both and still enjoy them, so many will be complacent not to upgrade.
We used to afford these benefits for far cheaper. $100 - $300 + tax (USD) used to be the norm for a 2 yr contract years ago.
Lack of carrier contract discounts + raising prices = holding onto a phone much longer, similar to that of a laptop since they perform many of the same functions satisfactory to most.