They expect that the competition will do the same--raise wages below inflation. Then you've got nowhere to go to make more. Even if it doesn't work out that way, most employees complain a bit but don't leave.
Competition will do the same initially, until the growth curves reverses. At that point, when you really need your experienced staff to drive growth, moat of them will be busy finding new positions.
Except that making lateral moves has almost always resulted in higher salaries regardless of macroeconomic trends. The competition may be giving current employees sub-inflation raises as well, but odds are that they're willing to pay more than your current company on an initial offer.
I think the dynamic I would be most afraid of is employees who have enough years experience to get a more senior position using this as catalyst to move on.
I have noticed that recruiter outreach to me has picked back up. I'm pretty senior and they're offering me senior roles that could pay more. My current employer has benefitted from current events though so I'm staying put. But if I ever want to fuck off, I easily can.
I have a friend who is very junior. He got promoted but still fucked off to a new better job because his current employer treated him poorly.
I think people are gonna start remembering they can fuck off again, and we're gonna end up somewhere between here and where we were when the job market was on fire pandemic and pre-pandemic.