This is generally an option, but in this case it is not in the original poster's best interest to negotiate. The only proper course of action is to leave. His employer has demonstrated how he prefers to do business and that's not going to change. Negotiation can win you the battle, but there will be plenty more down the line. Might as well get hired by more scrupulous employers (and there are plenty and the job market is good).
Incidentally, I would never suggest that anyone negotiate with the goal of getting a "fair" salary. I think that is our inner serf talking. Find your inner hedge fund trader and send him instead. Sure, $60k might be a marked improvement in your standard of living, but if you think "Oh yeah, that is fair", you're probably not going to say "That offer is interesting. Can you do better?" and get $5k extra (plus compounding on your annual raises, plus a higher peg on every future position in your career) for two sentences of work.