And it works out quite similar in the other direction: an employee retained by giving in to the ultimatum will likely pick up another offer a few months later, this time without an ultimatum or with the ultimatum rejected. And it all happens with all the engineer's peers avidly watching, inspiring them to set out for more as well.
Much better to just wish them luck at their new job, even if the replacement hire will be more expensive than giving in to the ultimatum (not excluding employees from wage market developments before they are tempted to try ultimatums might be even better)
I think this is a cynical take, and hear it a lot from management-types.
If I go through the trouble to share an offer with a willingness to stay, how exactly is that an ultimatum? Seems there is no avenue for an employee to try and stay except silently turn down offer and eat lower pay?
Go, let them know why you leave, allow them to learn that trying to pay under market can have consequences. Staying would deny them that learning experience.
Much better to just wish them luck at their new job, even if the replacement hire will be more expensive than giving in to the ultimatum (not excluding employees from wage market developments before they are tempted to try ultimatums might be even better)