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Yes, you should leave or get another job offer as a bargaining tool for your current company to match/promote you.
I don’t see it as a threat at all?
Companies put more value on new hires and external talent than on retention for the most part. I’m always looking around to see what else is out there.
They value retention at face value. Companies would love to keep the same people around without having to actually do much for them. I spent years never looking around, and when I finally did, it was surprising to say the least.
Cost of living adjustments largely disappeared after the 2008 financial crisis, being replaced by “pay for performance” merit increases. Many people now jump jobs frequently in their early careers to build their salary up.