Impact of Global Layoffs - UPSC Current Affairs

Jan 28, 2023

Context

Recently, several multinational companies like Amazon, Microsoft, Meta, Facebook, and Google have started a wave of layoffs with around 2 lakh IT employees losing jobs within just three months in a massive layoff spree.

Of which over 26,000 employees have been fired by 104 companies in the tech industry, just in January, and on an average, more than 1000 employees are laid off on a daily basis.
Out of the total employees laid off in the IT sector, 30-40% of them are Indians.

Probable Question

Many multinational companies have announced massive layoffs in recent months. What reasons can be attributed to this and how will global layoffs impact India? (150 words, 10 marks).

About causes of Layoffs

Covid 19 Pandemic:
- Covid has affected and is still affecting the economies and the layoff is the result of the loss faced by these companies.
- During covid, there was a substantial increase in the usage of the internet. However, the same decreased and affected several fields post-pandemic.
Cost Cutting: Companies, to reduce their expenditure and increase their profit, often do cost cutting through layoffs.
Phase of Moderation: After the pandemic, as remote work gains ground, companies are looking to resize the workforce to ease cost pressure.
Ukraine-Russia War: The war has also impacted the whole globe and this has increased the recession.
Potential Economic Recession: Experts say that soon many big economies will be hit by a massive recession, the same has already happened in a few countries and the layoff wave is the result of the same.

Situation of Indian IT firms

The Indian IT services firms are among the largest employers in the organized sector and any global economic trend is bound to have an impact on their growth projections.
Though there isn’t a discernible trend yet, this situation usually arises mainly in startups, so let's hope for the best.

Impact of Layoffs

Rise in Unemployment: Unemployment is a massive problem of the economy. The sudden layoffs even worsen the situation.
Impact financially: Even if companies lay off with a severance package, it is still a huge financial loss for the individual and puts a burden on the entire family.
Loss of prospects: Many Indian IT professionals who are on non-immigrant work are currently looking for ways to stay in the US after losing their jobs and changing their visa status in order to find a new job within the allotted time of a few months under these foreign work visas.
Impacts goodwill: Layoffs impact the goodwill of the company in front of customers.
Affects Mentally: The individual who goes through the process of layoff is impacted both financially and mentally. Layoffs affect the productivity of the person and their mental health.

Way forward

The tech talents, although have been laid off, will still have a lot of other avenues to get a job.
The number of international in-house centers opening in India is on the rise, and the demand for specialized skills is still significant.

Note:

Layoffs law in India

The matter of laying off employees in the IT, edu-tech, startups, social media, and other related sectors of both Indian and multinational companies, comes under the jurisdiction of the state-level government and is not governed by the central government.
As per the Labour and Employment Minister mass layoffs are illegal if the process of the terminations doesn’t fall under the provisions of the Industrial Disputes Act, and central and state-level governments can take action to protect the interest of the employees.
Process of termination under the provisions of the Industrial Disputes Act: As per section 3(1) of the Industrial Disputes Act, 1947, firms and companies that operate with 100 employees or more have to seek permission from the Government before implementing any kind of layoff or closure.

News Source: The Hindu

https://www.thehindubusinessline.com/info-tech/global-layoffs-wave-hits-home-indian-tech-workforce-feels-the-impact/article66397898.ece

Frequently Asked Question about Impact of Global Layoffs

What are the impacts of layoffs?

Rise in Unemployment: Unemployment is a massive problem of the economy. The sudden layoffs even worsen the situation.
Impact financially: Even if companies lay off with a severance package, it is still a huge financial loss for the individual and puts a burden on the entire family.
Loss of prospects: Many Indian IT professionals who are on non-immigrant work are currently looking for ways to stay in the US after losing their jobs and changing their visa status in order to find a new job within the allotted time of a few months under these foreign work visas.
Impacts goodwill: Layoffs impact the goodwill of the company in front of customers depicting the crisis the company is undergoing and for the new joiners or employees especially those who want to work for longer.
Affects Mentally: The individual who goes through the process of layoff is impacted both financially and mentally. Layoffs affect the productivity of the person and their mental health.

Why are top companies laying off employees?

Covid 19 Pandemic:
- Covid has affected and is still affecting the economies and the layoff is the result of the loss faced by these companies.
- During covid, there was a substantial increase in the usage of the internet, however, the same decreased and affected several fields post-pandemic.
Cost Cutting: Companies to reduce their expenditure and increase their profit often do cost cutting through layoffs.
Phase of Moderation: After the pandemic as remote work gains ground companies are looking to resize the workforce to ease cost pressure.
Ukraine-Russia War: The war has also impacted the whole globe and this has increased the recession thus the loss of these companies has resulted in layoffs.
Potential Economic Recession: Experts say that soon many big economies will be hit by a massive recession, the same has already happened in a few countries and the layoff wave is the result of the same.

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