If I were the engineer, I would also walk and let the project die. Because when that project is over, you're going to be the "highest paid but not best person on the team" and there's no reason they shouldn't be looking to release you for that anyway.
If you threaten to leave to another company and that's how you get a raise, the relationship's been poisoned and it's just a matter of time until you leave.
This is just another reason why I love project based consulting more than FTE. The incentives are properly aligned. Adam Smith would smile.
This can be a double edge sword. you enjoy your new responsibilities? good for you. not everybody wants to get more and more on their shoulders until the point of realizing that there ins't much time for that little thing called life. Also, most people who get promoted/raised around me end up working much more compared to raise they've been given.
Personal experience - in every single work I've done (roughly 10 customers/employers, perm+consultant) in 3 different countries, there was/is always room to grab more responsibility, more tasks etc. State of IT usually just a variation of a term MESS, with some technical debt here and there, everywhere. You work harder, solve more, take more responsibility and your career progresses along (or you go to place where it does faster).
But with this might also come 9-10 hours at work instead of 8 (plus lunch), company phone which is there just to remind you of the work when you're not in, maybe more weekends screwed up and so on. Even in otherwise very work/life balance oriented employers.
Want another advice? When having a formal talk with your boss, tell him you want a raise, but you don't want it for free, rather bringing added value. Define clear terms what is expected from you to get there, fulfill them and watch the magic happen :)
