Decoding The Mass Layoffs In Big Tech & Its Impact On Indian Startups

21The job market is tumultuously seething under the pressure of layoffs and employability problems that might seep deep into the cracks of inequality. With the cuts in the tech sector piling up, the future of the job market is quite unpredictable and hazy. 

The layoff spree came to light after the arduous and long-drawn procedure of acquisition of Twitter by the new boss Elon Musk who immediately slashed half his company’s workforce. The same conditions were met at Facebook’s parent company, Meta which will be soon conducting its significant round of layoffs. With the promise of laying off 13% of the workforce, Meta might be heading towards organisational changes that have been on the burner for quite some time now.  

Reasons Behind Meta & Twitter’s Layoffs

With these circumstances playing out in the tech sector, it is increasingly important to scrutinise why such a spree is materialising on such a large scale. It must be noted that last month, Meta announced a second straight quarter of declining revenue. This was additionally laid out with the forecast of impending sorrows of another drop that might be witnessed in the fourth quarter. 

In addition to this, digital advertisers can now be seen cutting back on spending. But one might ask why it must be so. The reason has to be the hazy economic environment and forecasts around the world. 

With the threat of rising inflation ballooning across various sectors, consumer spending is on the fall. In addition to the macroeconomic woes, firms at an organisational level are experiencing investor woes. Certain apps like Facebook are being witnessed suffering from Apple’s iOS privacy update, which has crippled their ad targeting campaign.

With higher attention being drawn to the privacy fiascos of the gigantic tech companies, the revenues and sales targets are on the fall. Consumer targeting has taken a hit which has greatly impacted the revenues of tech and IT companies across the globe. 

With disappointment being registered by some giant companies like Meta, its arduous and pitiable guidance for the fourth quarter has been seen wiping out one-fourth of the company’s market cap. This has effectively and significantly pushed the Meta stock to its lowest since 2016.

The business has not only taken a hit from the investors’ and consumers’ support but also from stringent competition from rivals such as TikTok, and a broad slowdown in online ad spending which was the main source of revenue and sustenance. Similar tales were stated by the Musk administration, which stated that Twitter was losing over $4 Mn per day. 

The Arduous Case Of Layoffs & Falling Profits

With profits on the decline and organisational costs on the rise, the variable cost of the company must be minimised. This is evident from the recent layoffs that have materialised across companies in various sectors. 

The workforce in the company is significantly considered as the variable factor of production. Thus, in times of hitches or strains, the workers are the first to perish. Many might also blame the lenient employment rules for the same.

However, no matter how true the lenient employment protection theory is, one cannot deny the role of arbitrariness and complications in the economy for the current massive layoffs. With an impending probable recession that can materialise anytime soon next year, employers can be cut some slack. 

The Macroeconomic Instability

If employers’ woes and reasoning are to be scrutinised, macroeconomic indicators play a major role in determining the rationale behind the massive layoffs. 

The cuts have been mandated and deemed necessary amid rising inflation, higher inflation rate, fears of a looming recession, tighter investment budgets, energy shocks, and sparser startup funding. All the factors taken together vehemently signal the fact that FY22 represents the beginning of a different economic climate.

With layoffs on the rise and the burgeoning inflation burning a hole in a consumer’s pocket, it is about time that the government steps in to regulate the job sector with stringent employment codes and laws. 

In addition to employment fairness schemes, governments should also work towards strengthening the job infrastructure in the market. However, this is easier said than done. With rising inflation and macroeconomic stability, the banks can do little in the field of job creation. 

Thus, with the unpredictability and uncertainty at the end of the 2022 recession story, will the economies around the world ever be able to unwind the hurt inflicted by the pandemic, or will the employees be grilled under the pressure of such instability? Guess, we’ll have to wait and watch.  

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