GLOBAL LAYOFF – ECONOMY
News: Google parent Alphabet Inc. to lay off
12,000 workers
What's in the news?
● Alphabet Inc is
eliminating 12,000 jobs, its chief executive
said in a staff memo shared with Reuters.
● The
cuts mark the latest to shake the technology sector and come days after rival
Microsoft Corp said it would lay off 10,000 workers.
● The
job losses affect teams across the company including recruiting and some
corporate functions, as well as some engineering and products teams.
Key takeaways:
● Over
the past two months, a slew of U.S.
multinational companies including tech giants Amazon, Meta, Intel, Twitter
and financial behemoths like Citi and Morgan Stanley, announced massive
layoffs.
Layoff:
● A
layoff is the temporary or permanent
termination of employment by an employer for reasons unrelated to the
employee’s performance.
● Employees
may be laid off when companies aim to cut costs, due to a decline in demand for
their products or services, seasonal closure, or during an economic downturn.
● When
laid off, employees lose all wages and company benefits but qualify for
unemployment insurance or compensation (typically in the USA).
Causes for Global Layoff:
1. Cost reduction:
● The
company is not making enough profits to cover its expenses and it layoff its
workers in order to cut back on costs in a way to sustain companies.
2. Staffing redundancies:
● Layoffs
also occur when a company needs to eliminate some positions due to
over-staffing, outsourcing, or a modification to the roles.
● A
company may want to eliminate redundant positions in order to make its operations more efficient.
3. Relocation:
● Moving
the company’s operations from one area to another can also bring about the need
to let go of some workers.
4. Merger or buyout:
● If
a business is bought out or decides to merge with another, the change might
lead to a change in the company’s leadership and corporate direction. Example: Twitter
5. Over hiring during pandemic:
● In
order to meet the demands, many tech
companies went on a hiring spree anticipating the boom to continue even after
the pandemic.
● However,
as the curbs were eased and people started stepping out of their homes,
consumption fell, resulting in heavy losses to these big tech companies.
● Some
of these resources were hired at a higher cost because of the sudden upsurge in
demand.
6. Fear of recession:
● As
the demand is coming back to pre-Covid levels and seeing the debt bubble almost
about to burst and fearing recession, these companies are cutting down their
costs by closing down low-performing projects and laying off the excess and
high-cost resources they hired to accelerate growth.
7. Russia-Ukraine War:
● The
war has also contributed to these layoffs as it has made the market more
volatile.
8. Inflation:
● Rising
inflation has also impacted several world economies severely leading to a
crisis in the job market as well.
Impacts of Layoffs:
1. Cut-throat market competition:
● Layoffs
are a painful but expected fact of life in a market economy exposed to
competition and trade.
2. Immense loss to the workers:
● Layoffs
can be damaging psychologically as well as financially to the affected workers
as well as their families, communities, colleagues, and other businesses.
3. Decreased customer loyalty:
● When
a company lays off its employees it sends out a message to customers that it is
undergoing some sort of crisis.
4. Emotional Distress:
● The
person who is laid off suffers the most distress, but remaining employees
suffer emotionally as well. The productivity level of employees who work in
fear is likely to go down.
5. Impact on India:
● 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.
6. Affects COVID-19 Recovery:
● The
layoff will eventually affect economic growth and jobs in global markets
leading to a crisis in the economy.
Way forward:
1. Voluntary retirement program:
● It
enables individuals to transition to retirement smoothly.
2. Cut back on the extras:
● If
a company is laying off workers to reduce costs, it can look for other avenues
of saving money. For example, the company managers can freeze additional
hiring, reduce or remove bonuses.
3. Consider a virtual office:
● Another
way to cut down on costs is to keep only the most important staff onsite and
send the rest of the workers home to work remotely.
4. Offer more unpaid time off:
● A
company owner can also save money by offering more unpaid time off rather than
eliminating worker's positions.