I can tell you why they let so many people into English lit graduate programs: so they can have a group of cheap labor to teach English composition classes. Use them for 3-5 years in a temporary hire position, then refuse to put them on a tenure track position. Then they have to scramble for another position somewhere else and go through the motions once again. But most large state universities couldn't handle their composition class loads without their work.
True. Could this work be done by advanced masters students, tho? It's one thing to spend 2 years on a degree you might conceivably use as a stepping stone for something else, but the time and effort for the doctorate are just too much in a field w/o tenured jobs.