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Saturday, August 27, 2016

Intel Diversity & Inclusion Reports
Vs. Labor Demographic Trends

Perhaps I am blind; however, I don't see what you can see from the so-called "diversity report", recently published by Intel Corp. as part of their PR campaign. Once you lay off employees by the thousands, the stats for those remaining in the workforce could improve by percentage, even without hiring a single additional person. Once you eliminate people who are at the higher segment of the pay-scale,  you can show a percentage rise of the average salaries, without spending a dime.

Intel Corp. has become the epitome of euphemism and PR machinery and the company that is run like a reality TV show, with more emphasis on public relations than long-term smart planning and delivery. There is no doubt that Intel Corp. is claiming "diversity" because, it has been warned by the Federal Government (EEOC) that its workforce composition does not match the demographic profile of the general population and other companies. In that respect, they are not alone in this position, within the "high tech" sector of the economy. Diversity however, covers more than just gender and minority groups. According to the Federal employment standards enforced by the EEOC, employees who are 40 years of age and older are included in the same "protected group" for employment discrimination as gender and minority groups. While Intel Corp. is boasting the wonderful achievements of inclusion in its workforce, the absence of any stated information regarding older (age 40+) employees in the overall workforce composition, is quite telling. The Government mandated OWBPA reports that were filed by Intel Corp. in conjunction with the 2015 and 2016 employee layoffs, clearly show that the company is doing it best to get rid of workers, included in this class of employees.

After four months of studying the grandiose initiatives that the Chinese Government is mustering followed by the gigantic amount of money poured by foreign investors into the Chinese semiconductor industry, I fully expect Intel's world-wide employment numbers to be trimmed down to 50-60K employees by 2020. This is of course, as long as the current executive management team remains at the top echelon. Further, it is likely that over the next five years, about 50% of the remaining employees or new hires, will consist of contractors (green badge) or outsoucng companies.

If you live in Oregon, better to face reality and forget about future milking opportunities with Mother Intel. Her tits are going to remain dry for a very long time. Future opportunities will come from small to medium scale progressive companies that will move into the PDX area due to the unsustainable cost of living in the Bay area and Seattle. Washington County and the State of Oregon should have learned their lessons from past history of downtrends in the U.S. semiconductor industry.

If you are looking at the world-wide data available about the relationship between productivity and personal income, there is clear evidence that the long-term trend is heading downwards, towards lower rates of labor compensation. Perhaps this is happening because in the developed world we have reached a very high level of productivity, beyond which there is far less incentive for improvement. Another possibility exists though that large employers are actively doing their best to curb employee compensation by all the means available to them, including collusion and conspiracy. This last point was evident in several court papers filed in "Silicon Valley", over the last few years.

The chart below demonstrates this trend for two leading economic powers: the U.S. and Germany.

(click on the diagram to enlarge)

In July 2013, Stanford University published a report regarding the economic effects of the U.S. workforce aging. Though the report does not directly address causality, it is not a new revelation that companies continue to eject employees who are paid at the upper-end of the pay-scale, in order to show more "beautiful" numbers on the quarterly reports, without regard to maintaining functionality or productivity. Cannibalization of the workforce is an easy way for corporate management to retain the stock value in times when their lack of insight and risk aversion seem to rule the day, and their resulting ability to demonstrate growth are close to nil.

The enormous gap between top management compensation and worker compensation entices company executives to focus on their bonuses and "golden parachute" exit plans by putting the business emphasis on short-term financial reports, frequently at the cost of risking the stability and long term future of the business. For some reason, a publicly traded company that demonstrates long-term stability; however has no claims for short-term growth, is considered a failure.

The prediction of flat growth curve in world economy for the next decade and beyond has been discussed in many newspaper articles and books; therefore I will not cover this issue here.

For those of you who are willing to exercise free will and take some risk there is the avenue of self-employment. The charts below (taken from the Stanford Report) demonstrate that the future is leading us into this direction, whether we like it or not.

(click on the diagram to enlarge)

The most striking information that I learned from the last two years of studying the subject, is that it looks like the U.S. and the rest of the developed nations are going to face a shortage of skilled labor force over the next decade or two, due to the massive retirement of the Baby Boomer generation. This irreversible demographic trend will present us with some upheaval, as well as a lot of new opportunities, for those who are willing to pursue them.

Skill level and ability to put common sense into a complex business situation is typically better handled by older and more experienced workers. If company executives are getting rid of older employees in order to cut on payroll and employee benefit programs today, they may find themselves in trouble tomorrow.

The lack of long-term perspectives and practical experience gathered over the years, gives older employees a business advantage that cannot be easily matched by younger and inexperienced employees. This fact can be easily established when reviewing all recent job listings on the market--employers are looking for "experienced" employees, yet expect them to also be young, cheap, and peppy all at the same time. This "wishful thinking" approach will not stand the test of reality for very long. Employers will get what they pay for.

I contend that what this situation translates to is creation of new opportunities for experienced workers who are adept and highly productive and are wiling to forgo the typical corporate employee benefit plans in favor of high hourly wage and independence from any particular employer. In other words--highly compensated freelance work.

Check out the above TED Talk video on YouTube

For those of you who are interested in reading the full Stanford report, it is available at: THE AGING US WORKFORCE -- A Chartbook of Demographic Shifts

Your comments are welcome.

All the best.

--Dr. Flywheel

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