The Wave of Tech Layoffs

Why in the news?

IBM recently joined a group of tech firms that have cut back on staff significantly since late 2022. About 3900 employees would be let go, the company announced. This is followed immediately by Big Tech's "midlife crisis," or the end of hypergrowth. 

Who made layoffs?

A wave of layoffs has begun at a number of multinational corporations, including Amazon, Microsoft, Meta, Google, and Facebook, with nearly 2 lakh IT workers losing their jobs in just three months.

  • In the tech sector alone, 104 companies fired over 26,000 employees just in January, and on average, over 1000 workers are laid-off every day.
  • Indians make up 30-40% of the total number of laid-off workers in the IT industry. 
    • A significant number of Indian professionals are on H-1B and L1 visas. 

A non-immigrant visa called the H-1B allows US businesses to hire foreign workers for specialized positions requiring theoretical or technical expertise.

What is the situation in India?

  • Since Indian IT services companies are among the largest employers in the organized sector, any changes in the world economy will inevitably affect their growth forecasts.
  • Although there is no clear trend, this circumstance frequently occurs in startups, so let us hope for the best.
  • Even though India aims to be a global leader in digital and technological advancement, it is crucial to remember that the macroeconomic realities facing the tech industry are harsh.
  • Two fundamental questions assume significance:
    • Given that India's labour laws have been criticized for being too strict and are inadvertently harmful to both employers and employees, one might question whether there is a need for government intervention or more stringent regulation. 
    • To remain sustainable throughout business cycles, employers—from startups to industry titans in the tech sector—should reexamine their hiring practices. 

What are the causes of layoffs?

  • Covid-19 
  • The impact that Covid has had and continues to have on the economies led to layoffs at these companies. 
  • Internet usage significantly increased during Covid, but it decreased after the pandemic and began to impact many fields.
  • Cost 
    • Companies frequently engage in cost-cutting through layoffs in order to decrease their spending and increase their profit.
  • Moderation phase
    • Companies are looking to reduce their workforce after the pandemic as remote work gains popularity to relieve cost pressure.
  • Russia-Ukraine conflict
    • The recession has worsened due to how the war has affected the entire world.
  • Economic Recession
    • According to experts, several significant economies will soon experience a severe recession; some countries have already experienced it, which led to the recent wave of layoffs.

What is the impact of layoffs?

  • Financial
    • Even if businesses offer severance packages to laid-off employees, it still represents a significant financial loss for the individual and burdens the entire family.
  • The sudden layoffs worsen the already serious issue of unemployment in the economy.
  • Layoffs impact Goodwill: Layoffs affect a company's reputation with clients.
  • Mental Effects: A person laid off experiences financial and mental effects.

Way forward

  • There is still a huge demand for specialized skills as more foreign in-house centres are opening in India.
  • The tech talent will still have many other job opportunities even after being fired.



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