Companies don't spend time thinking/rationalizing why they shouldn't raise current employees' salaries. They are simply forced to pay market rate for new hire, that's all, no one thinks about "what about our existing employees?"

Sometimes we romanticize tech company too much that we forgot that they are, at its core, just like any other company, and an engineer is just a headcount. Faang sometimes has the ability to steer away from that perception, but it remains true for almost all non-faang. Everyone below leadership is replaceable

>They are simply forced to pay market rate for new hire, that's all

That's kind of tangential to the point of this conversation though. They're forced to do so via turnover rather than proactively raising wages, which hurts them far more in the long run.

The flaw in this is that even if you rise through the ranks, each promotion usually only gets you a 10% raise at most, 15-20% if you’re really lucky. So your initial low comp will continue to haunt you unless you rise to a level where there’s a step change in pay, usually some sort of leadership role.

If turnover is low, leadership will often assume people must be fine with their current compensation, since their data indicates the market continues to clear.

More than once I’ve seen startups go and do a round of comp adjustments after an uptick in turnover.

That, and the difficulty of explaining to management/shareholders that they plan on increasing payroll by N% despite not actually acquiring new talent in the process.

At my current company (and I assume in many other companies), this is the main reason for not compensating existing employees fairly.

If my manager (lead of 15 devs) went to his shareholders that we want to adjust people's salaries so that they are more likely to stay longer (let's say this cost 300k a year), they would not approve it even if it meant we could reduce the number of devs leaving from 4 to 2.

If he said we need 300k for hiring two devs, it would be approved without a question.

Back-of-the-envelope math based on European salaries.

Is the current talent worthless? that's what their actions indicate.

Disagree since “good talents” are dependent on the whims of those making that judgement.

I’ve seen people go from “irreplaceable” to “not a good fit” when a new CEO comes in.

I’d argue companies are aware that good talent costs money and they are happy to acquire it internally or externally when the arise needs. If no need, then business as usual.