Almost everyone is doing it wrong.
Here's why

Many good people don't do well on interviews. They get nervous with unfamiliar people and surroundings. Does not help when interviewers look at them like a python at a rabbit. Make candidates comfortable, offer water. And never treat interview as a final exam with 100 percent as final grade. You have a track record to look at, successes, accomplishments, goals,...etc. Who do you want to hire, people who do well on interviews or on the job?

And to the jobseeker, don't tell them how much you're earning. Tell them what you want to be earning. If your current company is under-paying you why should the next one do the same?
Companies should pay you based on your value not on the flawed practices of your previous employer. And if they don't see your value make it their problem not yours by going elsewhere.