In a recent LinkedIn post, Nikhil Kulshreshth, the ex-assistant manager L&D at Pharmeasy, shared his struggle with being jobless for the past five months and receiving barely three interview calls. “It’s very difficult for me to survive where I have to pay bank EMIs and my kid’s school fee,” he wrote.
Similarly, Thrifty K, who was previously employed as senior software engineer at CommerceIQ, shared the shock of being told over a two-minute call that they were being let go by their ex-employer without any prior notice. “Yesterday, Good Friday came out to be a bad one for me,” he lamented.
These stories are just a few of thousands of similar cases worldwide. Dunzo, the 24×7 local delivery app that recently raised funding, reportedly laid off 300 of its employees — around 30% of the company. Meanwhile, Unacademy, one of India’s largest ed-tech platforms, let go of around 12% (about 350) of its total employees.
Even Apple Inc, which had so far remained largely unaffected by layoffs, found itself doling out pink slips to some of its corporate retail teams. In the first quarter of 2023, the world saw more than 168,582 tech employees laid off from various companies worldwide, with Dunzo being the latest addition from India.
These developments are the precursor to the coming recession and companies are preparing for it.
Recession around the corner
Amidst these layoffs, the International Monetary Fund (IMF) has trimmed its outlook for global growth by 0.2 percentage points, with the Eurozone forecast being revised significantly to 0.5% from 1.2%. The IMF has downgraded almost all its forecasts for advanced economies worldwide, cutting its growth outlook for the global economy to 1.7% for 2023, from its earlier projection of 3%.
The US economy saw a significant downgrade in its growth prospects, with the IMF now forecasting only 0.5% growth, down from an earlier projection of 2.4%. The World Bank has also cut its growth outlook for China for 2023, from 5.2% to 4.3%, Japan from 1.3% to 1%, and Europe and Central Asia from 1.5% to 0.1%. The latest report from the IMF, Global Economic Prospects, paints a bleak picture of the global economy, with many challenges for tech professionals and businesses alike.
According to IMF chief Kristalina Georgieva, IMF estimates one-third of the global economy will experience a recession this year.
Tech layoffs: Upcoming recession?
While the layoffs are happening in the tech industry in large numbers, they are just a proactive measure against recession, the question arises, how many tech layoffs until the recession finally reaches the doorstep? In September 2008, when the recession hit the USA, more than 433,000 lost jobs. In November, the number was 800,000 and in December, a total of 660,000 people lost their jobs. According to a report, around 210 million people were unemployed globally, in the recession.
The world now is more interconnected than ever, and while the Indian IT sector didn’t face much of a problem in the 2008 recession, if the recession was to happen today, the economies like India will face enough and more heat. NASSCOM reveals that around 51 lakh people are employed in the Indian IT sector alone, as per the data from 2021-22. Meanwhile in the US, around 10% of the working population is employed in the technology sector.
In the 2008 recession, big tech laid off more than 65,000 employees globally for two consecutive years, and in that comparison, today we’ve 3X of that number of tech employees laid off in the first three months of 2023 itself. However, the tech industry also has grown so much in the period of two decades and the over-hiring in the pandemic also has aided in the layoffs.
The Age of AI and Layoffs
The Reserve Bank of India defines a recession as a period of prolonged decline in output experienced across much of the economy. But in India, techies’ contribution to the economy accounts for only 7.4% and in the USA as well, it is not much either. Historically speaking, white-collar job losses hardly contribute to any recession. The reason is, while the tech companies are laying off, they’re also investing heavily in future tech. For instance, while Microsoft laid off nearly 10,000 employees, the company also invested close to $1 billion dollars in OpenAI, which will create more jobs in the future. Similar is the case with IT firm Accenture, which laid off almost a similar number of employees, while investing in various firms and even acquiring companies working in the field of AI like Flutura.
But then the question comes that when companies are laying off at such a huge scale while investing in their AI ventures, will these companies hire them back when the recession is over? The age of AI is already here with companies like Microsoft launching products like GitHub Copilot or Copilot for business. In fact, A recent Goldman Sachs study found that generative AI tools could impact 300 million full-time jobs worldwide, which could lead to a “significant disruption” in the job market.
So, while tech layoffs are increasing around the world, and in recession, they might even get doubled, the question of whether they’ll be employed back when the waters are clear, remains there.
