* New hires get paid more because they are worth more to the employer. Point blank. You don't have to pay existing employees more to keep them working there. "A bird in hand is worth two in the bush" was meant to be a parable but it turns out to be rather more literal
* Never accept the counter-offer. If you have gone as far as interviewing outside, you are already checked out, and you are already branded as disloyal. It's time to make your exit! If you ask for a counter-offer, it should be a move to squeeze more out of your offers, not a real attempt to "stay" where you have already decided to leave
* Arguing about a raise is almost always a waste of time. If you are not happy with your 3% COLA, will 5% really mollify you? LOOK FOR NEW WORK