Sinking Ship: The Global Layoff Phenomenon

Meta terminated 11,000 employees in November 2022 and an additional 10,000 employees in March 2023. Amazon had several large cuts, including 10,000 employees in November 2022, 8,000 in January 2023, and 9,000 in March 2023. Accenture is planning to cut around 19,000 employees, which is equivalent to 2.5% of its workforce, in 2023. In a BBC interview, Elon Musk disclosed that the micro-blogging platform, Twitter, has experienced an extensive reduction in its workforce, surpassing 80%, leading to the termination of over 6,000 employees since his takeover. Consequently, a meagre fraction of approximately 1,500 individuals remains from an initial count of around 8,000 employees before Musk's acquisition. Apart from being industry giants, the thread that connects them all is their decision to lay off thousands of people.

Source: Tech Target

"The Challenger Report" by outplacement firm Challenger, Gray & Christmas revealed that the tech industry experienced a significant 649% hike in layoffs in 2022, reaching the highest number since the dot-com bubble in the late 1990s, while an article by TechTarget confirmed that the total number of tech employees laid off in 2022 exceeded the combined layoffs of both 2020 and 2021.

Across the service industry, millions of competent and proficient skilled workers have lost their jobs. Companies like Google, recognized for fostering a welcoming and innovative work environment, and Microsoft, committed to employee development and providing comprehensive benefits, have also let go of some of their tenured workforce. Driven by profitability, these companies often employ a multitude of strategies aimed at achieving success. In the face of market instability, these firms may be compelled to reduce their workforce to realign their trajectory towards prosperity.

The advent of the Covid-19 pandemic led to an inevitable surge in the adoption of digital technology due to adherence to social distancing norms and enforcement of nationwide lockdowns. Consequently, the majority of information technology enterprises engaged in widespread recruitment efforts. As per CNN, the corporate sector experienced major changes in the workforce, exemplified by the remarkable expansion of Amazon's, Microsoft’s ,and Meta's workforce by 106%, 54%, and 103%, respectively, between 2019 and 2022. Such a surge can be attributed to the widespread adoption of remote work, online education and virtual grocery shopping, circumventing the need for physical presence. As a result, tech companies reaped unprecedented profits during this period. However, as the world reverted to normalcy, the demand for technology regressed, leading to subsequent layoffs.

Source: Bloomberg

Additionally, the ongoing Russia-Ukraine war has caused significant disruptions to supply chains, resulting in a rise in interest rates and fuel costs, coupled with inflationary pressures. According to "Guardian" Ukraine's central bank governor, Kyrylo Shevchenko has urged for discussions with the IMF after raising the interest rate from 10% to 25% in February . In response, companies are preparing themselves for an altered economic landscape and cost-cutting. According to IndiaTimes, due to the war, Nestle was forced to halt its production in three factories that were located in Ukraine. The company subsequently terminated the employment of 4000 individuals, leading to substantial downsizing efforts, aimed at meeting their financial goals. These mass layoffs sparked serious apprehensions among the remaining workforce, currently working remotely and striving hard to achieve the company’s goals.

The sudden loss of employment can have profound psychological impacts on individuals and their families, potentially causing significant distress and even increased vulnerability to mental health problems. The abrupt cessation of regular income and the ensuing financial difficulties can place immense strain on individuals, evoking feelings of helplessness, despair, and anxiety about their prospects. Furthermore, the absence of comprehensive unemployment benefits proffered by governmental entities, such as the Unemployment Insurance in the United States, the Universal Credit System in the United Kingdom, and the Job Seeker payment in Australia, prevalent across numerous nations, exacerbates the adversities faced by the unemployed populace. The constrained duration of available benefits often proves inadequate to sustain the needs of households, forcing them to make compromises and forgo a decent standard of living. Recent research undertaken by the Mental Health Centre Organisation in June 2023 highlighted that the impact of layoffs can differ between men and women, particularly in societies such as India, where traditional gender roles and expectations impose greater emphasis on men to be the primary breadwinners for the family. The weight of unemployment and the responsibility to provide for their families can be significantly higher for men, adding an extra layer of stress and societal pressure.

Amidst the sluggish labour market, companies may respond by not only reducing the number of new hires but also delaying the onboarding process for potential candidates and implementing stringent appraisal processes, which can lead to slower increments for existing employees. These changes in hiring and appraisal practices can have a ripple effect on the overall work environment. Notably, the loss of experienced employees due to layoffs can result in significant knowledge and skill gaps within the organisation, posing challenges in performing tasks efficiently and making informed decisions. The resulting knowledge deficit, compounded by the increased workloads on remaining employees, can lead to heightened levels of stress, a sense of being overwhelmed and undervalued, and diminished morale, motivation, and productivity. Moreover, the upheaval caused by mass layoffs can disrupt the established company culture, fostering uncertainty about job security and the future of the company. This can further impact employee engagement and overall job satisfaction.

Given these challenges, it becomes crucial for individuals to seek support from available resources such as professional counselling services, support groups, and community organisations. They must also leverage personal and professional networks to explore new job prospects and stay proactive in developing skills and knowledge, ultimately aiding in regaining employment and restoring a sense of stability and well-being.

The implementation of layoffs is inseparable from the imperatives of a faltering economy, the burdensome expectations of investors, and the vital pursuit of market survival. These downsizing can have a domino effect on the economy, giving companies a sense of prudence and reducing their propensity to invest in new businesses and expand their operations. This reluctance may result in dwindling employment prospects, dampening economic growth, curbing overall activity, and possibly initiating a global slowdown in financial momentum, with far-reaching implications for both businesses and consumers over the long term.

India, known for its robust trade ties with numerous nations and central role in the global economy, is prone to the consequences caused by layoffs in foreign countries. Such repercussions affected multiple sectors, resulting in subdued demand for goods and services, and reduced output and employment. Among these, the IT industry in particular has borne the brunt of this global downsizing as multinationals have taken on the arduous task of curtailing the workforce in the country. The Naukri JobSpeak Report (January 2023) reported a concerning 25 percent decrease in new hires in the IT sector compared to the previous year and some companies slashing pay by almost 50 percent to expedite placements, while active employment in the technology sector has plummeted nearly 50 percent compared to the corresponding period in the previous year. Furthermore, India heavily depends on remittances from overseas workers. It received a record-high of $89,127 million in foreign inward remittances during 2021-22, and thus, layoffs can have a detrimental effect on income inflows. Therefore, governments may find it necessary to implement comprehensive economic stimulus measures to alleviate the impact of layoffs, leading to increased government spending, targeted interventions, and potential adjustments in monetary and fiscal policies to mitigate the adverse effects on unemployment and overall economic stability.

In summary, the recent spate of global layoffs reflects the volatile nature of the service sector and its susceptibility to market fluctuations. The ramifications of these workforce reductions extend beyond the immediate impact on individuals and enterprises, encompassing far-reaching consequences for the global economy. Effectively addressing the impact of layoffs requires a combination of government intervention, industry adaptation, and individual resilience to navigate the changing landscape.

By: Aastha Arora and Sargam Jain

Under the guidance of the R&O Director, Sanaa Chawla