We live in a time when IMF and World Bank have projected a gloomy future with respect to the global economy. A lot of this is due to the largest economies like USA, China, and Europe slowing down. This situation has had a cascading impact on the economy. One product of this is the global layoffs witnessing right bow. We have seen a global company like Twitter recently acquired by Elon musk. 90 percent of its Indian workforce was laid off not soon after. This brings to mind a pertinent question, is this the beginning of the great Indian layoff festival? Zuckerberg's Meta decided to lay off 11,000 workers making it a global phenomenon. This is an issue that plagues even the most highly skilled and high-paying employers.
Why is this happening?
The world is moving towards a recessionary trend in which the speed of growth has reduced. Additionally, companies had accumulated a lot of funding they cannot sustain now. Some are firing employees so they can get profitable. Another reason can be Russia's invasion of Ukraine which has led many companies to backtrack their business with the latter.
Let us look at the case of Amazon, the operating income of the company was $4.9 Bn in Q3 FY22, which has reduced to half in Q3 FY23 at $2.5 Bn. In an era of inflation and recession, Amazon had to see which products are harming its treasury the most. The conclusion came to Amazon's Alexa which was at a loss of $5Bn. They have invested $6.5 Bn in India, yet they cannot make profits. The reason is their low margin on electronics and other players like Flipkart. The lack of profitability is also there in the food business where Amazon has recently ventured. Lastly, the ONDC platform of the government and strict e-market places rules can also be problematic for Amazon. All of these factors have fuelled mass layoffs.
Why is it a bad idea?
Layoffs are not good for companies as employers. It speaks negatively about their company culture, corporate governance, and poor ethics. The employees are not even asked to serve the usual 30 to the 90-day notice period, with minimum to zero compensation. This shows a lack of empathy and responsibility. This situation will not just impact the financial well-being of employees but their mental health as well. The last time we witnessed this situation was in 2001 when 100,000 workers lost their jobs, which is just half of the present 200,000 we are witnessing. It is time for companies to step back and hire judiciously to avoid these situations in the future.