Switching jobs has gotten me 30% pay increases twice in my life. I've never seen a yearly raise from a current employer for more than 4% though and significant promotions with pay increases from within are a rare event without moving into management roles. If you're young and your experience and capabilities multiply quickly, job hopping is the single most effective way to better your income.
Lots of employers seem to be OK with the churn of young developers. Pay the below market rates until they develop enough skills and confidence to demand something better, replace those people with new grads and retain the people willing to work for below average salary.
This is the truth. Nobody will increase your pay as much as someone willing to compete with another company for you.
The trick is to make companies where money isn't the only motivation for working there, because those kinds of companies will always lose in the talent wars anyway.
You left out a bigger factor, in my opinion: tracking compensation to inflation or the success of the business, not market rates.
If the market rate for an engineer is (making up numbers) 35% higher than it was in 2010, each engineer better be making at least 1.35 times what they were five years ago. Probably more, considering they're likely better at what they do than they were five years ago.
Market rate means nothing to employers. If they could give you 3% raise per year and get away with it, they would. The only way for non-union developers to protect their interest is to look out.
Market rate means something to employers - it's the rate they need to pay you more than, if they don't want you to have lots of better options for where to work. If you don't have lots of better options for where to work, you're more likely to stick around, and less distracted while you're doing so.
Show me a union worth five minute of talking to as a software engineer, and I'll talk to them. I've yet to see anything worth even a minimal effort, and I have looked. I've yet to see a single one that offers to actually improve my life.
I think I'd argue that not paying you the higher wage to prevent you from moving is an "anti-employee tactic." A side effect of this anti-employee tactic is you hopping jobs.
No it isn't. I have noticed that during my career I have had very few measly pay rises (and 1 decent one). Switch job and I usually get at least 10% more.
Its crazy, as on some systems that I have worked on it has taken me 6 months to get fully up to speed (not that I wasn't productive before then, just a lot slower). Rather than pay 10% more, they will let employees leave and pick up the tab for a new person learning the system.
They started it, employees would be fools to not leave when the wind is blowing in that direction.