That employer doesn't sound like they're one I'd like to work for, unfortunately I have worked for a couple like that. Measly raises, and even then, only when you twist their arms.
Not willing to relocate, I've been lucky to stay employed, let alone get any decent raises in the last 15 years.
I think I see some upturn in the local economy though, as I have managed to switch jobs twice in the last 3 years, with a nice raise each time, and the added benefit that I'm now back to a 5 minute drive to work, which increase my net income, in gas savings.
Don't have much more to add to previous comments as far as approaching the employer, but you'll find quickly that the biggest raises you'll ever get are when you switch jobs.
David