Answer? Yes, it's bad! It's common practice in business to give a raise, as that is a major incentive for individuals to meet their annual work goals. Sure, self improvement is good and you're often getting good skills over time, etc...but compensation matters! Money Matters!
Now, of course, there are exceptions to this rule, such as small and medium-sized business that struggle because of their own market's fluctuations, or commission-based positions, or because they compensate in other ways such as bonuses throughout the year.
But for the vast majority of companies and nonprofits, 2-3% is the common minimal annual raise to give annual for a good, productive staff person who has tried and met most, if not all their goals. 5-10% is often given for star performers.
In fact, 3% is technically equal to no raise. What, why?? Because cost-of-living increases about 3% or more per year. So everything you spend on to live, from food to heat to electricity tend to go up, so the 3% just barely keeps pace with that or sometimes falls behind it.
That being said, no raise is, in effect, a pay cut!
SO, WHAT DO YOU DO IF YOU AREN'T GETTING RAISES?
If you're not getting raises, find out why specifically. Ask how you can work to assure that you'll get them by meeting mutually agreed upon work goals that are attainable within the year.
OR if they seem unreasonable or blow you off about it, get outta there!
The best way to get a raise, if you're in a company that sticks to the minimum, is to transition to another job! 10-15% raises from transitions, when done properly, are not uncommon. At least that's been the case for the clients I've helped through the job transition process.
And if you do the math, one transition to a new job can quantum leap you 5 years into your salary future in one move! That's huge! It's like getting 5 years of work experience for free! ;)
Not getting raises? Need help figuring out how best to handle it. Let me know!