Lots of reasons. People tend not to appreciate what they have. However I think the main reasons are economic and political. Companies want to keep costs down. T

Lots of reasons. People tend not to appreciate what they have. However I think the main reasons are economic and political. Companies want to keep costs down. They don't want to pay market rate. Some employees will stay put, because they're comfortable, and don't want to uproot they're life; so you can pay them less. Politically companies "want" to budget raises as a fixed cost and divy up among employees. So they'll try to negotiate against their budget and fixed, manageable raises / promotions. Lots of people will play along. The logic is insane. Suppose I'm the employee, and selling a car; the company is buying one. I want 10k, the company says, I've only "budgeted" 7k, but will agree to 8k. Meanwhile I have a buyer willing to pay 12k; company says no deal, and instead goes out and pays 15k for the same car. This seems to be how many of these situations unfold. The crazy thing is many employees are willing to stay for less than they can get on the market; but the company just won't do it.