I don’t think it needs to have been a thing that happened for it to serve its purpose; in fact, the fact that it is crazy to throw a baby out with the bathwater probably makes the point more strongly.

People definitely threw out bathwater before, so that part is clear. People making this analogy believe that others are prematurely tossing out ideas without paying any heed to the fundamentally good principles in those ideas. Thus, throwing out a precious baby with the dirty bathwater.

The implication, that they would be doing the equivalent of throwing out a baby, helps to underscore how obviously silly and objectionable their action would be.

TL;DR, the saying makes sense even if nobody ever threw a baby out with the bathwater.

I heard the answer to this once but I’m not sure if it’s actually true.

Apparently it goes that when medieval peasants bathed, they would re-use the water in the tub for the whole family because fetching new water every time would be a huge hassle.

The order in which people bathed was from oldest to youngest so by the time the baby was clean, the water was super dirty and you couldn’t see the bottom of the tub, hense it could be possible to have something in the water that you cant see.