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We are deep into 2023, and over 2,16,910 people have already received the dreaded pink slips this year, as per layoff.fyi. The figure marks a staggering 315% increase from the previous year’s job cuts, signalling an impending crisis. Almost all the tech companies have frozen hiring, deferred joining, and even paused salary hikes for now.
According to media reports, Indian IT giant Infosys has delayed the salary hike for its non-senior management staff which was supposed to come into force from July. Merely a month ago, Amazon postponed the joining of graduates by at least six months amid widespread job cuts. A fresh graduate from Kolkata’s Jadavpur University, who was slated to join as a Software Development Engineer (SDE-1) in June, told AIM, that he received the news of the deferral at the end of May. However, none received the compensation for the delay.
Not only did Amazon delay start dates, the company also shut down its Halo Health division in July. When combined with the previous layoffs from January this year, the total number of job cuts at Amazon amounted to 27,000, which is approximately 8% of its workforce and the biggest in its history.
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Wipro also reduced the salary of fresh hires by 50% taking it from Rs 6.5 lakh per year to Rs 3.5 lakh per year in April. Starting last month, Wipro has stopped recruiting new employees, who are asking for more than 30% salary hike. Instead, the company is focusing on implementing automation solutions to handle the majority of tasks typically handled by HR.
This month, Microsoft announced additional job cuts, following the 10,000 layoffs announced in January, 2023. Following suit, Meta, currently basking in the success of Threads, also terminated 6,000 employees in May. Since November last year, a total of about 21,000 people have lost their jobs at Meta.
Apple, which managed to navigate through the layoffs last year relatively smoothly, eventually succumbed by laying off a small number of employees in its corporate retail team in April. Alphabet, Github, Twitter, Accenture, LinkedIn, Netflix, and Salesforce are among the hundreds of companies that have downsized their workforce this year.
But Why Is This Happening?
Whoever thought that as the calendar flipped to 2023 layoffs would cease, were extremely wrong. The World Economic Forum had predicted that a global recession, bolstered by geopolitical tensions, such as the Russia-Ukraine conflict will hit in 2023.
Just a day ago, US Treasury Chief Janet Yellen warned about the ongoing risk of a recession amid persistently high inflation. Consumer price inflation has surged worldwide due to the geopolitical crisis, resulting in weakened consumer demand. This continuous rise in prices has compelled central banks globally to tighten monetary policies, a departure from the norm.
The Federal Reserve has been attempting to curb inflation by raising interest rates to their highest level in decades, which has resulted in slower economic growth and fears of a recession. While the central bank decided not to further increase interest rates last month, they indicated that additional rate hikes in 2023 are possible. The Federal Reserve stated that a recession in 2023 is likely but is expected to be mild and short-lived.
Plus, there is an increasing investor pressure to implement a more assertive cost-cutting strategy. Given the current circumstances, a lot of companies have excess of employees, inflating costs. Now, with employees coming back to office after the pandemic, companies are trying to undo the overhiring they resorted to during the Covid-induced lockdowns.
India is at Risk
India is not well-cushioned to protect itself from the impact of it. Indian IT services giants such as TCS, Infosys, Wipro, HCLTech, and others are expected to have limited revenue growth in the first quarter of FY24 due to the challenging macroeconomic conditions in the US and Europe.
Since nearly 80% of the Indian IT services industry’s revenue comes from North American and European markets, the economic uncertainty in these regions has resulted in reduced technology spending by companies. As per a Naukri JobSpeak Index, white-collar hiring in India experienced a 3% decrease in June as industries like IT, Retail, BPO, Education, FMCG, and Insurance showed cautious hiring patterns.
The report revealed a year-on-year decline of 3%, with 2,795 job postings in June 2023 compared to 2,878 in June 2022. Additionally, month-on-month job postings decreased by 2%. The IT industry particularly faced concerns, witnessing a significant 31% decrease in new job opportunities compared to the previous year.
Amid an impending global recession, geopolitical tensions, and inflationary pressures, big tech companies as well as the Indian IT have resorted to cost-cutting measures, including layoffs and deferred salary hikes, to mitigate the impact. Brace yourselves for this downturn is not going to be over anytime soon and the worse is far from over.
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