Tech Layoffs and their Effect on the Changing Job Market

 Introduction

In recent months, the tech industry has been rocked by news of massive layoffs, causing fear and uncertainty among those affected. Big tech companies have laid off thousands of employees globally, with the ripple effect soon reaching India, where over 130,000 employees have lost their jobs. While the cloud of layoffs is yet to completely pass, employers and employees are concerned about how the job market in India will shape up in 2023 amid these unprecedented times.

How Will the Layoffs Shape the Job Market in 2023?

The scale of the layoffs is reminiscent of the unforgettable 2001 and 2008 layoffs, but the trends do not indicate that it will turn out like those two periods. However, the impact of the layoffs will bring out several changes in the job market.

No Rapid Hiring:

Leading IT firms adopted a quick-scale hiring approach during the pandemic to meet the rapid surge in client-side demand. However, the demand curve has almost flattened, and companies are spending every penny after careful consideration. Hiring in 2023 will be the old school way– calculative and for the long run.

Shift from Employee to Employers Market:

The heightened demand-supply gap during the past few years (amid a growing economy) had shifted the hiring advantage in favor of employees. However, the slew of layoffs and a relatively weak economy has shifted the balance of power in favor of employers.

Expansion of Talent Pool:

The sudden layoffs have flooded the talent pool with skilled tech talent, several of them highly trained, which will help reduce the demand-supply gap and make it easier to find high-quality talent. However, the availability of highly trained employees in niche skills like AI/ML/DevOps continues to remain a challenge.

Non-Tech Companies as Potential Tech Employers:

The rising focus on digitizing process flows coupled with a growing demand for IT functions in conventionally non-tech sectors like automobiles, telecom, BFSI, and manufacturing, will see non-tech companies emerging as potential high-value employers of tech talent. 

Realignment of Talent Pipelines for Tech Companies:

Fundamentally sound tech companies will see 2023 as the right time to capitalize on their strong cash flows to realign their talent pipeline for the long run with highly trained skilled talent without facing intense pressures of market cannibalization.

Replacement Hiring:

Talent, especially at the mid and senior levels, will face the pressure of being replaced with lower cost new hires from the suddenly large talent pool hungry for jobs, or with internal entry-level hires that the company has nurtured at more competitive compensations.

Will 2023 Be Better Than 2022?

India continues to remain the fastest-growing economy globally and is set to buck the overall bleak hiring trend indicated by most economies for 2023. The government’s strong focus on encouraging FDI and building India as the global business hub is panning out positively, and 4 out of 10 employers in India expect to see a 20% uptick in hiring in the coming year, with 7 in 10 IT companies expected to increase their workforce in Q1 2023.

2022 was a year of correction and rationalization, and the job market will grow in a better direction in 2023 driven by a rising focus on employee wellness in terms of job flexibility, diversity, and wellness, and a rising demand for talents with skills in the field of AI, ML, DevOps, cloud computing, process engineering, and data analytics.

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