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 barely receiving 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 happening worldwide. Dunzo, the 24X7 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 previously remained unaffected by layoffs, found itself laying off 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 U.S. 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 at large numbers, they are just a proactive measure against recession, the question arises, how many tech layoffs will happen when the recession finally reaches the doorstep? 

For instance, 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 jobs. According to a report, around ??450 million people lost their jobs in the USA alone, 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 too face the heat. 

As per the data from NASSCOM, around 51 lakh people are employed in the Indian IT sector only, as per the data from 2021-22. Meanwhile in the US, around 10% of the working population is employed in the technology sector. 

Even if half of the tech workforce is laid off amid the recession, it’ll be only close to 3-4% of the total workforce being laid off. 

However, when we look at the definition of recession by the Reserve Bank of India (RBI), it is 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. 

And historically too, the 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 as well. 

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, however, the company is investing in various firms and even acquiring companies working in the field of AI like Flutura. 

So, while tech layoffs are increasing around the world, and in recession, they might even get doubled. If it continues, the peak recession is going to be worse than it is now.

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