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Tuesday, June 5, 2018

Student Loan Debt Reached All Time High of
in Q1 of 2018

Student Loan Debt Reached All Time High of $1,521,019,350,000 (more than 1.5 Trillion dollars)  in Q1 of 2018. Consequently, outstanding student debt currently exceeds auto loan debt ($1.1 trillion) and credit card debt ($977 billion). Considering that 42% of people who've gone to college took out debt, this number has high significance on the future of our economy and the future welfare of young families. According to the College Board, "In 2015-16, the 60% of bachelor’s degree recipients from public and private nonprofit institutions who borrowed graduated with an average of $28,400 in debt"

A recent FRB Board of Governors (FRB-BOG) report on the Economic Well-Being of U.S. Households in 2017, published in May 2018 informs us about the student debt situation:

Over half of college attendees under age 30 took on some debt to pay for their education. Most borrowers are current on their payments or have successfully paid off their loans, although those who failed to complete a degree and those who attended for-profit institutions are more likely to have fallen behind on their payments. • Among those making payments on their student loans, the typical monthly payment is between $200 and $300 per month. • Nearly one-fourth of borrowers who went to forprofit schools are behind on their loan payments, versus less than one-tenth of borrowers who went to public or private not-for-profit institutions.

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As the table below shows, many families have taken debt to finance education of their children and/or grandchildren. This creates a "spillover effect" on debt ownership that continues to burden older adults, even after their offspring have become independent adults.

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Here are some interesting anecdotes quoted from the same FRB-BOG report:
  • Nearly 25 percent of young adults under age 30, and 10 percent of all adults, receive some form of financial support from someone living outside their home.
  • Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money. This is an improvement from half of adults in 2013 being ill-prepared for such an expense
  • Over one-fifth of adults are not able to pay all of their current month’s bills in full.
  • Over one-fourth of adults skipped necessary medical care in 2017 due to being unable to afford the cost
  • Nearly half of adults age 22 and older currently live within 10 miles of where they lived in high school, but those who have moved farther from home are more likely to be satisfied with the overall quality of their neighborhood.
  • Out-of-pocket spending for health care is a common unexpected expense that can be a substantial hardship for those without a financial cushion. As with the small financial setbacks discussed above, many adults are not financially prepared for health-related costs. During 2017, over one-fifth of adults had major, unexpected medical bills to pay, with a median expense of $1,200. Among those with medical expenses, 37 percent have unpaid debt from those bills. In addition to the financial strain of additional debt, over one-quarter of adults went without some form of medical care due to an inability to pay.
  • Those with less income are more likely than others to forgo medical care due to cost. Among those with family income less than $40,000, 39 percent went without some medical treatment in 2017. This share falls to 25 percent of those with incomes between $40,000 and $100,000 and 9 percent of those making over $100,000.
  • Over the past several decades, the rate at which Americans move—both short distances within states and longer distances across the country—has steadily fallen. This reduction in geographic mobility also fits within a pattern of less job switching, more generally, or reduced labor market fluidity.
I highly recommend reading the full FRB-BOG report for those of you who are concerned about the future of our economy and the welfare of our general population.

All the best,



Saturday, May 26, 2018

The Federal Government is Investigating Intel Corp.
for Age Discrimination Violations

Recently published articles in the Wall Street Journal and the Oregonian web site, report that the Equal Employment Opportunity Commission (EEOC) is conducting an expanded class-level investigation regarding age discrimination complaints that have been filed with the EEOC against Intel Corp.

The Wall Street Journal (WSJ) was the first news organization to report about the ongoing investigation in an article written by Georgia Wells, entitled: Intel Faces Age-Discrimination Claims. The WSJ article mentions that multiple complaints have been filed with the EEOC in conjunction with several rounds of massive employee layoffs over the last three years. The fact that the EEOC would continue an investigation almost three years after a reported violation indicates that the reported allegations are substantial, in spite of Intel Corp. denial of the charges.

The Oregonian news organization expands the coverage on the subject matter in an article written by Mike Rogoway entitled: Intel under investigation for alleged age discrimination. Rogoway, who covered the Intel Corp. massive employee layoffs back in 2015 and 2016 also provided statistical charts showing a clear correlation between an employee age and their odds of being selected for layoff. In this recent article, Rogoway provides a copy of a previously published chart from 2016, demonstrating the very clear age discrimination factor in the 2016 layoffs. Similar charts are available for the 2015 layoffs.

Intel Corp. 2015 Layoffs (click on image to enlarge)

Intel 2016 Layoffs (click on image to enlarge)

Publicly available information also demonstrates that while Intel Corp. was laying off thousands of its current employees, the company was actually acquiring new employees by the thousands. Many of these employees came in via Intel corp. sponsorship of H1B visas, H4 spousal work visas, "Green Card" sponsorship and F1 to OPT work permits. All of these additions to the workforce involve importation of foreign workers who are at the mercy of Intel Corp. for continued stay and employment in the U.S. In other words, Intel Corp. was actively replacing older workers with imported slave labor.

Intel Corp. Number of employees from Annual Report
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As can be seen from the above information, taken from the Intel Corp. 2016 Annual Report, The number of employees reported at the end of 2015 was 107,300, or about 600 more employees then reported in the previous year. However, since about 1200 employees were laid off mid-year, in July 2015, the the end-of-year number shown in the Annual Report actually represents a gain of 1800 employees relative to the previous year. This gain of 1800 new employees acquired before 2015 year end, contradicts Intel CEO's announcement to employees that the July 2015 were necessary to save on expenses "due to forecast of flat revenue"! Throwing experienced (and older) employees off the bus in order to replace them with cheaper newcomers, is the more likely explanation.

Similarly, in 2016, Intel Corp. laid off about 12,000 employees, yet the difference between the numbers reported for the end of 2016 are 106,00, thereby reflecting an effective gain of 10,700 employees  (106,000 - (107,300 - 12,000)) = 10,700.

Where did Intel Corp. acquire the replacement employees? According to a recently published Pew Research Center report: "By the end of the 2004-2016 period,  there were a total of 1,474,000 OPT approvals and 1,473,000 initial H-1B visa approvals".

Layoffs of older U.S. citizen employees not only manifests employment costs savings due their higher salaries, but also cuts on the cost of medical insurance expenses for a self insured company like Intel Corp. It is taken for granted that medical insurance costs tend to rise with the age of older employees and their dependents. If induction into employment of almost 3 million imported slave laborers in the high tech sector is not a significant economic factor in this lucrative sector of the U.S. labor market, what is? 

Intel Corp. attitude towards lowering the cost of labor led company management to commit law violations by conspiring, along with Apple, Adobe and Google to halt competition for employee recruitment in the Bay area and by doing so curbing potential employee pay escalation. The company was engaged in this practice for over a decade since 2001. Court records show that Intel Corp. was forced to settle its ill behavior with its employees, following a court ruling in 2013 (see United States District Court of Southern California - San Jose, Case No. 11-CV-02509-LHK).

Taking the significant risk of engaging in an anti-competitive illegal activity is a clear indication of the high priority that  company executives and the board of directors gave to curbing payroll costs. Clearly, Intel Corp. never refrained from its quest to curb employee compensation and was looking for every avenue to achieve its goals. The evidence points to systemic changes in the company's HR practices, enacted by company executives to get rid of older workers and replace them with cheaper workers. The 2015 layoffs, in which about 1200 employees lost their jobs, seem to be a small scale "experiment" that was meant to serve as a learning tool for company executives before executing the "magnum opus", the massive layoffs of 2016.

While Intel Corp. is not the only company to utilize the F1 to OPT loophole to circumvent the H1B visa quotas, utilization of such loophole is certainly one of the tools that the company utilizes to recruit cheap, captive workers. Public records show that Intel Corp. was the number one company to sponsor F1 to OPT foreign worker visas, with twice as many records registered as Microsoft corp. (see chart below).

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Both the WSJ and the Oregonian articles provide new exposure to issues that we have been covering in this web site for the last two years. We encourage our readers to refer to several of our previously published articles, including:
Further recent information regarding the ill practices that high tech employers are using to substitute older workers with cheaper workforce are covered by Peter Gosselin in these ProPublica articles:

All the best.


Sunday, May 13, 2018

The Cheap Labor Loophole
OPT is the Name of the Game

Over the last three years I have been looking at the systemic abuses of F1 visa to OPT conversions. OPT, which euphemistically stands for "Optional Practical Training" is one of the major loopholes that large tech employers are using to circumvent the H1B visa caps while recruiting cheap and captive foreign workers residing within the United States. This loophole facilitates major layoffs of older (and more expensive) domestic employees and subsequently, replacement of these employees with cheap (entry level) foreign employees, using the OPT program for stay/work visa extensions.

Recently, the Pew Research Center published a comprehensive report on the subject of F1 to OPT visa conversion program. This program, driven mostly through the lobbying efforts of large High-tech employers continues to increase in size, completely unchecked.  The Mercury News outlet published a summary of this report in the latter part of this week. As you can see from the article referenced below and the PEW Research Center report, taking advantage of the OPT loophole, has become a standard operating procedure for many high-tech companies. The number of F1 (student visa) holders converted to OPT has grown 400% between 2008 and 2016, as shown in the chart below.

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Note that foreign workers who remain in the U.S. under the OPT program, are effectively, "indebted workers". They are being paid low wages and they are totally dependent on the graces of their employer, to maintain their residence and work permit. This makes them "ideal" target for exploitation. Employers would simply be "stupid" to not take advantage of this loophole to reduce the cost of labor. In the meantime, older domestic workers continue to be laid-off in droves.

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As can be seen from the chart above, Intel Corp. is one of the top companies taking extensive advantage of the F1 visa to OPT conversion loophole. Actually, as the chart above shows, Intel Corp. is No. 1 on the chart, leading all the employers listed above, including Microsoft Corp.

Without a doubt there is a price to pay when a company only focuses on cutting expenses and gets rid of its more experienced (however, more expensive) workers. In the case of Intel Corp. there is no reason to guess where this executive management policy fails. The writing is on the wall for Intel Corp. has been there since the 2015 mass layoff. Recent news about the 10 nm production line failures (see references below) serve as indicators of much more substantial problems to come. The company's ability to execute has diminished significantly, following the 2015 and 2016 massive employee layoffs.

The Mercury News outlet covered the OPT stay/work visa conversions loophole in a recent article, which is mostly based of the Pew Research Center report.

This is a quote from the Mercury News article referenced below:

OPT has caught the attention of critics pushing for reduced immigration. John Miano, a fellow at the Center for Immigration Studies, called the 2008 STEM extension a “scheme” by Microsoft to “circumvent the H-1B quotas.” The program started out giving work-experience opportunities to foreign students but has since been “transformed into a full-blown guestworker program whose stated purpose is to provide labor to American business,” Miano wrote in a September blog post for the center

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Clearly, the numbers shown on the map above speak for themselves. It is difficult to come to any other conclusion other than that the OPT program is pandering to the interests of high tech employers, by supplying access to cheap foreign labor, at the expense of domestic workers.

The Pro Publica article: CUTTING ‘OLD HEADS’ AT IBM, covers the multitude of ways in which older employees in the high-tech sector are loosing their jobs to foreign workers, through a variety of legal loopholes and shenanigans committed by Corporate America.   

When we examine the growing trends in the high tech industrial sector, of laying off older employees and replacing them with cheap and indebted guest workers, it seems that the OPT program lost its original purpose and de facto, under the intense lobbying of big business, was transformed into a U.S. Government sponsored, older worker mass displacement program!

--Dr. Flywheel


Thursday, April 26, 2018

Quickie Update
Household Income not Keeping up with Debt

Household Debt Jumps as 2017 Marks the Fifth Consecutive Year of Annual Growth

The Center for Microeconomics Data latest Quarterly Report on Household Debt and Credit reveals that total household debt reached a new peak in the fourth quarter of 2017, rising $193 billion to reach $13.15 trillion. Balances climbed 1.6 percent on mortgages, 0.7 percent on auto loans, 3.2 percent on credit cards, and 1.5 percent on student loans this past quarter.

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In conjunction with the content of my previous article (See: Are We Heading Towards the Next Financial Crisis?), this update is, to say the least, very disturbing.

This trend shown in the chart above is alarming due to its consistency since about 2013. Note that the non-housing component is rising at a much higher rate than the component mostly attributed to mortgages. Stagnation of salaries alongside increase in the accrual rates of personal credit card debt as well as of student debt are major factors in this picture.

Considering today's very tight job market, this is an opportunity for workers to demand higher pay rate. The lower corporate income tax on corporations should facilitate accommodation of worker's demand for raises. The question remains open, whether an equalization of household income will actually take place, as a result of the tax changes in fiscal year 2018. Will Corporate America share their bounty with American workers and contribute to true growth of our economy.

All the signs are pointing to a different directions though namely, driving personal debt to much higher limits by easing off bank regulations, all while simultaneously, raising interest rates.

A certain businessman who declared bankruptcy six times in a row, yet rose to high economic and political prominence, is proving that everything is possible in America. However, for most of us, experiencing bankruptcy, even once is far too much. 

See also:

--Dr. Flywheel