I'm actually even ok with losing to inflation if that's the market rate. My main issue is internal raises seem to be detached from market rates. I mean, why would you want to pay your engineers that are already familiar with the system and domain less than an external hire?

Maybe there is some math done somewhere that says the money saved from underpaying from reduced raises is more beneficial than the risk of losing an engineer that's already familiar only to be replaced by a more expensive engineer that's new.