New hire budget is bigger because they're competing for talent. For existing employees, since most don't leave jobs for better pay, they only need to approximate industry average pay.

Switching jobs is stressful and you can only do that so often before being flagged as a job hopper. One company declined to interview me because I switched jobs in less than 3 years(2.5). Plus, if the pay is decent, why rock the boat? The competition may have worse work environments, bosses or colleagues.

This is why unions existed.