Big tech companies around the world are laying off workers. Apple not only laid off employees. He laid off about 100 contract workers. In these months, hiring and reducing costs.
China’s global technology giant Tencent It laid off 5,500 workers. April-June. Netflix has been laying off 150-300 employees every month. Microsoft It laid off 1,800 workers. In July.
In the background of the controversy that can be found in Elon Musk, Twitter It laid off 30% of the workforce. The talent acquisition team in July. Meta (formerly Facebook) went offline in June.
Google, the world’s No. 2 tech company, this month said it will lay off its employees “There will be blood in the streets”, meaning that if they don’t do more there will be massive layoffs.
Declining profit margins were cited as the reason for layoffs in almost all cases.
Tech majors aren’t alone in saying early goodbyes to their employees. Tesla, the world’s largest manufacturer of electric vehicles, has been operating since July. next month, Ford will rise again Approximately 2,000 permanent employees and 1,000 contract employees in the US and Canada. This is in addition to the recent complete shutdown of two plants in Tamil Nadu and Gujarat. This year, the total job loss will be around 8,000.
Even e-commerce giants like Walmart and Shopify are downsizing their workforces. Declining sales are said to be the reason for the layoffs.
Ratings agency PricewaterhouseCoopers (PwC) recently conducted a survey of the top executives of 700 US companies, and half of them planned to reduce their workforce this year due to the downturn in business.
Paradoxically enough, the PwC study also found a seemingly opposite trend. Telecom, media and many technology companies are also facing severe talent shortages. They are investing more in automation to deal with the skills shortage. According to the survey, the healthcare industry is experiencing a severe talent shortage, and it is drawing back people who have recently left for more attractive pay packages.
This is not the only paradox in the global labor market. The number of workers being laid off is far greater than the number of workers being laid off.
Unbelievably high pull and stop rate
According to the U.S. Bureau of Labor Statistics, 3.9 million workers left in April 2021 due to the second wave of the pandemic, the highest number in 30 years. This figure includes 2.8 million non-agricultural workers. Later, it became clear that this was not entirely due to the epidemic and the lockdown.
Strike rates among U.S. non-farm workers increased in the following months, when the economy was said to be recovering. Companies’ performance is making a remarkable recovery after the pandemic, but employee burnout is increasing. This new crisis is reaching epidemic proportions. It was not limited to the US. The trend is global.
Ratings agency Deloitte conducts an annual survey of Generation Z (those born in 1995 or later) and Millennials (those born between 1981 and 1995) who work for corporate houses. 11 findingsTh The annual survey, released in May, is quite revealing. In the year By 2021, 46% of Gen Z and 45% of Millennials will feel burned out due to the demands of their work environment.
No wonder, according to the survey, 40% of Gen Z and 24% of Millennials want to quit within two years. This means that the younger lot are more enamored with the work in the global corporate world.
In India, the media reported on July 8 1.2 million out of 6 million workers Tata Consulting Services (TCS), India’s largest private employer, has gone out of business in the last 365 days. Such an attrition rate of around 20% is common among other IT majors like Infosys and Wipro.
Not all better pay packets followed. Some workers who changed jobs said they quit their jobs earlier because they found the work environment too stressful. Work pressure and workplace bullying made it difficult to keep up. Unfortunately, they face the same problems in their new jobs, many of them admit – because every company is in a mad race to compensate for the pandemic and urge their employees to work harder.
Manifestation of a deep crisis that is coming
Whether workers are being laid off or forced to leave on their own, these are signs of a worsening crisis that is slowly engulfing the global tech world. Even as the tech industry has been leading the rest of the industry to recover from the pandemic, it is starting to show signs of slowing down.
The recovery was impressive for many tech companies till the last quarter of FY22 but the results of the first quarter of FY23 show a decline in performance. While some hope that the downturn will be temporary and that growth will recover, others in the sector have concluded that the recovery is shallow and heading for a major crisis.
Many rating agencies have predicted that the developed US economy is heading for a recession. Europe and China are also showing signs of slowing down. The war in Ukraine has led to high inflation globally, which is expected to have a very negative impact on growth soon and push major economies into deep recession. Naturally, the early trends of that looming crisis are finding their reflection in the working conditions of the technology sector.
Other manifestations of the crisis
Dismissal is not the only manifestation. Many tech companies are cutting wages for new hires and existing employees. Senior staff with high pay packets are being poached and new staff with matching skills are being hired at low pay. Junior employees are trained in more advanced skills in the company.
As ease of closure is a key aspect of ease of doing business, many industries are closing. After closing down its factory in Sriperumpudur Chennai, Nokia is planning to set up its new 5G smartphone manufacturing facility in India within a few years. Ford has been toying with the idea of starting a factory in the country to manufacture e-vehicles after shutting down its fossil-fuel car plants in India. Even before the new labor laws went into effect, strikes and fires were already common.
In short, the global technology industry is in chaos. Stocks of technology companies on the NASDAQ have high volatility and their similar tails It shares on Sensex and Nifty Reflect this violence.
By mid-July, shares of TCS, Infosys, Wipro and Tech Mahindra were down 30%-50% and Nifty IT index fell 32% From the 52-week high. The turmoil, in all likelihood, signifies a tech bubble and a slowdown in the tech business cycle. The technology business cycle in India and elsewhere may be independent of the overall business cycle for some time. But in the end, it mixes with the whole cycle and is governed by it.
In this sense, these layoffs and industry closures are perhaps indicative of the tech industry’s impending global downfall.
Apart from job loss, there are some other reasons for this confusion.
Changing the nature of work
In the next few years, the IT industry is poised for massive workforce restructuring and displacement, with the prospect of massive automation due to artificial intelligence and cloud computing. Not only the IT industry, even conventional manufacturing cannot escape digitalization. Supply chains and components must change according to the final assembly unit and export requirements.
Global production
Digitalization comes with new headaches. Often times, some SMEs have to spend more than 50% of their total technology spend on cyber security alone. In most cases, this is a mandatory situation caused by the needs of purchasing companies at the top of the supply chain. If the product itself is world class, it is only natural that it puts pressure on the technological parity. This increases costs and competition from financially sound companies.
Beginners event
Economist Joseph Schumpeter put a premium on breaking down the concept of innovation in practice! It seems that the revival and survival of capitalism is possible only through partial self-destruction. This is the starting point where tech startups are being welcomed and promoted. The phenomenal growth of start-ups not only creates the crisis of capitalism itself, but also exacerbates the crisis. In the process, they themselves get into a crisis.
When Prime Minister Narendra Modi launched the Startup India initiative, the target was to have 10,000 startups. He proudly said that there are 74,000 startups operating in the country recently. Modi, however, did not share with the country that these 74,000 startups were built on the corpses of nearly half of the startups – 20,000 startups have closed since the pandemic and 12,000 of them this year alone.
Additionally, venture capital funds, angel investors and other financiers are capturing a good portion of the startups’ revenue as investors/lenders and promoters can only capture a small fraction of their revenue. An online e-commerce startup may create 10 jobs but close 100 traditional local stores in the process. It is still unclear whether startups contribute to the economy’s net growth or net unemployment.
Inflation and a decrease in consumer spending
Inflation has passed double digits in the US and is fast approaching that mark in many other major economies. Russia’s war in Ukraine has contributed significantly to this situation. Central banks in all major economies are raising interest rates, which will increase the cost of investment funds and thus hurt growth.
A decrease in consumption expenditure decreases aggregate demand. So inflation is a double whammy for the economy. Many economies are reaching a point in the business cycle when rising consumer spending is no longer able to boost GDP growth. And the huge increase in capital investment by the government has not been able to bring about the same growth dividend as before.
More money going into public infrastructure projects – the so-called pump-priming economy – no longer leads to overall growth. Such a situation is one of classic failure. The global tech sector may be experiencing the beginning of one.
The writer is an analyst. The views are subjective.
