Labor is the single biggest cost driver of most any American company. And it keeps growing year over year.
That's funny, because wages have been pretty stagnant for more than 20 years.
At one IT company I worked for, labor costs grew anywhere between 6 and 10% per year, and that was with relatively high turnover in entry-level jobs.
How does the labor cost compare to revenue? You can't just look at it in isolation like that. Also, if you have high turnover in entry-level jobs, you're doing something wrong. What does the retention policy look like. High turnover is very expensive for most companies. You should be looking at that, now how to get more out of low-level labor for the same pay.
The drivers of these costs were the experienced senior personnel who are with the company for years, who negotiate for and get the bonuses and raises they arguably deserve.
"Arguably" being the key term. If you're not getting a return on the investment for those bonuses and raises, why are you handing them out? If you are getting good ROI, then what's the issue?
They also tend to manage to negotiate to be at the top of the pay scale for their profession/age/region. All good, right? No--because of wage creep. Wage creep means that because salaries must always go up for retained employees, labor costs must always go up.
Why? As mentioned, retention is cheaper than turnover. There is no reason to continue to keep your employees "at the top" if they are not providing good value for the company. If they are at the top working for you, they will probably have a hard time getting more at other companies coming in off the street, so you can limit those raises, or at least make sure the increase are justified by increase value / revenue.
increasing headcount means increasing COGS and OCOGS beyond what current revenues and profit margins will allow for,
Why are you increasing headcount? Is it because the company is growing? Then why do you complain about sharing increased profits with the workers that are generating it for you?
often the only alternative is to go to the Indian contracting houses and outsource IT personnel because middle-aged experienced native IT people are a massive cost center to the company.
What a short-sighted bunch of bullshit. You're an executive? Well you suck at your job, and doing this is going to hurt your company, whether you are too ignorant to realize it or not.
You, me, everyone who has a 401K or stock options or owns stock, we demand growth at all costs.
So now you have growth, but it's better to cut your employees (who are doing the work) not only out of the growth, but out of any compensation at all for helping you get there. Then you hire these young, inarticulate buffoons to run the front lines and, guess what? Now you're bleeding customers.
The days of American IT workers commanding above-average salaries for their work are numbered and fading away. This change is coming, it cannot be stopped, and it doesn'lt matter that many of the big employers lied to get this. This would have come regardless. Change IS happening, but it's not necessarily the fault of big bad CEOs and faceless Mr. Smiths--it is the turbulence of the world at play.
Actually, from your description of your management style, it is absolutely your fault, because you can't see how harmful these practices are to your company's long-term survival. Today you're replacing US working with cheap foreign labor. Tomorrow your (now shitty) company is replaced by cheap foreign goods and services.