Think of it from the company's point of view. If you're hiring a new employee then the options for a good candidate are a) move jobs and work for you, b) move jobs and work for someone else. You're competing with other companies.

If you're reviewing an existing salary for a good employee their options are a) do nothing and accept the shitty raise, b) move jobs and work for someone else.

Moving jobs has significant cost for most people - it's time consuming, stressful, might involve moving house, etc.

That downside gives employees who haven't proven they are looking for a new job a significant negotiating disadvantage.

If you really want you can tell your boss you are actively looking for new jobs. That will increase your chances of getting a bigger raise, but of course it has other downsides so most people don't do that.