Ashraf Engineer
February 24, 2024
EPISODE TRANSCRIPT
Hello and welcome to All Indians Matter. I am Ashraf Engineer.
Have you been hearing of the massive layoffs across sectors, but especially in the technology space? It’s a contagion that’s spread across the world but is felt perhaps most severely in India because of the lack of alternative jobs and the large number of people we’re adding to the employment market every year.
Among the companies that announced job cuts was Wipro, which said it would lay off hundreds of mid-level employees in order to boost profit margins. Food delivery app Swiggy let go of 400 employees in January, while e-commerce major Flipkart laid off 1,000. In late December 2023, Paytm fired 1,000 employees across departments. As per the latest data, so far in 2024, five companies have laid off 1,775 employees.
As far as startup layoffs are concerned, India ranks second globally since 2020. Indian startups have struggled as funding has become tougher. Layoffs.fyi data says terminations hit an all-time high in 2023, with 16,398 start-up employees losing their jobs – which is 15% more than in 2022.
Last year, embattled ed-tech firm Byju’s fired more than 5,000 employees as it fended off lenders and its valuation fell more than 90%. Employees, it is widely said, fear more cuts this year.
Even Unacademy, Ola and Vedantu have laid off many. Paytm and Reliance Jio Mart also shed more than 1,000 jobs in 2023.
In fact, layoffs have become entrenched over the past four years. According to layoffs.fyi, in 2020, 34 technology firms laid off 13,052 employees. In 2021, it was five firms laying off 4,080 employees. In 2022, 49 Indian technology companies laid off 14,217 employees with the number rising to 19,921 across 104 companies in 2023.
As you can tell, it’s getting worse. In fact, technology-focused headhunting firm TopHire said roughly 100,000 employees have been laid off in India in the past two years, which is way higher than the reported numbers. This difference can be attributed to silent or concealed layoffs and forced resignations, it said in a report.
Employment loss is rapidly approaching pandemic proportions.
SIGNATURE TUNE
Why are layoffs so common now? Analysts attribute it to a range of factors: an uncertain global economic landscape, runaway inflation, supply chain disruptions, slowing year-on-year revenue growth and revenue per employee. The layoffs seem to have come in two waves. First, the period after the COVID-19 pandemic when companies struggled to survive and then when central banks started hiking interest rates since the second quarter of 2022. Don’t forget the fall in stock prices of technology firms and a slowdown in funding. Companies also cite the rise of artificial intelligence, which is taking over many jobs.
All of these factors are making themselves felt globally in the technology industry. In 2023, 226,000 staff were let go by tech firms across the world – a rise of nearly 40% over the previous year, according to AltIndex, which analyses company data to spot trends and insights. Industry leaders such as Google, Meta, Microsoft and Amazon all laid off staff.
Since the beginning of 2021, tech firms have laid of more than 405,000 employees across the world.
These layoffs have impacted Indian techies working abroad.
Between November 2022 and January 2023, according to Bloomberg, 30% to 40% of those laid off were Indian IT professionals. Many were forced to return to India only to face a troubling job market.
Despite their expertise and experience, employers don’t always want to hire these techies. Employers feel they will leave to go back abroad the first chance they get. These professionals are also often overqualified for the jobs available or unwilling to take the kind of pay cuts that would get them into the consideration set.
The loss of employment comes at an emotional as well as social cost.
The period for which laid off workers find themselves without jobs tends to be quite long. They are also perceived as non-performers by recruiters whereas the problem has its root in their previous employers being managed poorly or facing business challenges.
Large-scale layoffs during tough economic times make the job market a very crowded place, making it even tougher to find work. Often, a wider economic recovery can be job-less, indicating that companies have invested in automation or chosen smaller operations.
Companies that have laid off staff, meanwhile, are perceived to have done so due to poor performance, which means they attract fewer customers and investors, thus jeopardising the position of even the staff that have not been laid off.
Worryingly, studies suggest a lower life expectancy for those laid off. One study found that employment termination leads to a 15% to 20% rise in death rates during the 20 years that follow. Also, those that do manage to find a job again tend to earn less and work longer hours. They are also more likely to not find a spouse, get divorced or remain childless.
The information technology industry accounts for 7.5% of India’s GDP and employs 5.4 million people. So, layoffs hurt.
This, in turn, requires policy intervention that protects workers while not getting in the way of industry growth.
One solution could be unemployment insurance, which has helped in countries like the US and Canada. Such insurance cushions the impact of a job loss on individuals and the economy by enabling those who have been laid off to continue consuming goods and services.
In India, there are two government unemployment assistance programmes: the Rajiv Gandhi Shramik Kalyan Yojna and the Atal Beemit Vyakti Kalyan Yojna, but they are focused on organised manufacturing. And there are other conditions, such as the employer should be the one paying the premium and that the employee should have been on the rolls for at least two years. These limit the scope of such programmes.
Regardless of what solution is thought up, India needs some sort of safety net in these choppy economic times. We are no longer insulated from global trends; it’s a natural consequence of liberalisation and becoming more plugged in to the global economy. There are tremendous benefits to such an approach but with that come the downsides too – as so many employees, especially in the tech industry, are discovering.
Thank you all for listening. Please visit allindiansmatter.in for more columns and audio podcasts. You can follow me on Twitter at @AshrafEngineer and @AllIndiansCount. Search for the All Indians Matter page on Facebook. On Instagram, the handle is @AllIndiansMatter. Email me at editor@allindiansmatter.in. Catch you again soon.
