Because ramping up both the difficulty and challenge is a quick way to bring your game into 'unfair' and possibly 'unplayable' territory.
Also you're going into PvP now? Since when has PvP ever coddled players? LoL, DotA, WoT, Planetside, StarCraft, Battlefield, CoD, EVE. All of these games prove that modern gamers are not weak by your metric because the very nature of these games means accepting failure after failure while you try to 'git gud'. Using PvP as an example is bad because PvP means constantly pitting your skills against other live humans which results in natural challenge. It also means sticking with it and learning if you want to get anywhere.
Ah but those are just tweaks to the stats of the NPCs in game. They increase the difficulty but not the challenge. You're still using the same skills that you learned but with a much smaller margin of error. A challenging game makes you learn a wider array of skills and then makes you apply them successfully to beat the game.
Games have gotten less difficult by giving us a bigger margin of error. But games have gotten more challenging by making us do more to succeed.
A game has to be difficult and fair. There is a niche for really punitive games but I believe that niche is small and getting smaller if social trends continue as they are. A challenge is fine, as long as the developer provides you the tools and you have total control over your outcome.