Contender Series is just another way to even more oversaturate the MMA market. For the average person, if they watch the Contender Series and the UFC once a week, that's probably enough MMA for them and they have no interest in looking at other promotions.
In regards to the wage suppression, I think they put some guys they are not too fond off on their against other hard opponents. All these guys could have signed contracts for way better with other promotions but they choose to sign up for Contender Series for a chance at the UFC.
I am guessing Marcos Breno is getting twice or even three times the CS starting contract with Bellator for example.