For the most part, your salary is affected by supply and demand. As soon as you leave your job, the demand to fill your position goes up. If you don't leave, the demand stays the same. The demand to keep your position filled won't be as high as when a vacant position needs to be filled. Am I missing something?
Your statement makes sense if there are only a handful of people in the market that can provide what you provide, but for a job that can be done by thousands it doesn't hold.
Most will pay less than your current job. You only need to find one that pays more.
They might do that because they lack of engineers is what is holding them back from growth.
Or they desperately need a certain skill set.
There is a lot of money sloshing around and opportunities to get paid more elsewhere.
Now if you are underpaid it might be you are in the 30-percentile and 70% pay more so you can walk into a pay raise with eyes closed.
Logically you are right that the current company should pay more. I think there are too many companies whose business model can’t support all staff being paid what they can get on the market. They rely on people being loyal.
(They could survive if they became more efficient but few companies seem interested in really doing that)
That sounds like poor accounting that's overly dismissive of the outside world. If it's going to cost $X to fill the position, why is the person currently in the position worth $X (ignoring for the moment that filling the position will also often actually add a bunch of one-time costs like recruiters/interview time/signing bonuses..., but potentially also be offset by unvested bonuses/stock/whatever that the departing employee is relinquishing).
If you are in charge of salaries, and you don't pay attention to the fact that you're paying $0.7X for someone that you'd have to spend $X to replace, you've put yourself in a weak position compared to the companies who are immediately willing to pay >$0.7X for that person. The demand has already gone up, you just weren't paying attention.
An employee is like a subscription, you pay on an ongoing basis. And they can quit on you any day. Paying an employee currently and in the past doesn't necessarily mean you have no demand for their services in the future - having someone in-house who'd be happy to continue working for you is basically the best-case scenario in a role that you still demand. Don't try to exploit it by hoping they don't notice they're being shortchanged...
Assuming a replacement of equal skill, the demand to keep the position filled is the same as the demand to backfill it, because either action results in the same number of people in the same role.
This is the best description of Coasian Theory of the Firm I have heard in ages
We've had a bullseye object lesson in the US over the past year and a half where company owners are complaining endlessly about being on the low side of the supply curve, trying to force the supply to act against their own interests via government action. Suffice it to say, I don't agree that supply and demand is the primary driver in salary budgeting, it's power.