You didn't say anything about this explicitly, so I'll add it.
The people who study balance sheets, and decide whether tr not to risk their money on your company (either in the form of equity or loans), have apparently all decided that cheap labor is a universal good, and profits that come at the expense of squeezing them out of your labor employees, rather than from increased sales, are also markers of good management.
The effects of hiring the cheap labor (and the overall lesser skill levels that come with it) are not felt for several quarters, and since everything is all about this quarter, hiring twice the labor for two thirds the cost looks good on the current balance sheet. Plus they get to inflate their work force numbers. Since the goal of every manager is to grow head count and budget, and since nobody can objectively judge how efficiently you ran your department, more head count is better. Especially when you can't grow your budget, and especially when you can shrink you budget at the same time.
The a couple of years later, when your company starts to implode, you get your golden parachute, and the company becomes somebody else's short term problem.