Unending job cuts
Reports indicate that IT major Cognizant is slated to lay off more than 6,000 employees this year, as part of its "regular appraisal cycle". Some contend that the company could fire as many as 10,000. For engineering graduates fresh out of college, finding a job in could get a lot harder as the IT industry comes to terms with significant changes in their business model. It is a fact that many firms are investing more in digitisation and automation—artificial intelligence, machine coding, etc. In a bid to slash costs, these companies are hiring fewer employees.
However, greater automation, which is a lasting structural change to how existing businesses function, is not the only factor responsible for job cuts. Others include restructuring in many existing industries, poor investment sentiment, low capacity utilisation in the face of uncertain markets at home, abroad and weak credit generation, and greater consolidation by major firms, especially in the telecom sector. These factors could dent the aspirations of millions of young people preparing to join the workforce every year.
According to a recent report in the Business Standard, the number of employees brought on board by the likes of as TCS, Infosys, Wipro, Cognizant, and HCL Technologies this year will be 40% less as against last year—from 60,000 engineers this year against 100,000. In a separate development last year, the country's second-biggest private lender HDFC Bank cut down its staff by 4,581 employees in a single quarter. Even in the banking sector, there has been greater emphasis on automation, as algorithms reduce dependence on workers and accomplish the same task at a much faster pelt.
Last year, this column had analysed news of Indian engineering giant Larsen & Toubro (L&T) firing 14,000 employees or more than 10% of its staffers. Companies such as Microsoft, IBM, and Nokia were also reported to have cut back on their workforce last year. "Over the next five years, India will need to create 12-15 million non-agricultural jobs per year. However, between 2005 and 2012, only eight million such jobs were created. Hence, the gap of 4-7 million jobs a year needs to be addressed, which is likely to rise with the rise in young people joining the labour force," a joint report by Boston Consulting Group and the Confederation of Indian Industry (CII) said. India will need to deliver nearly 1 million jobs a month.
However, the International Labour Organisation's latest jobs report, titled World Employment and Social Outlook for 2017, makes for grim reading. It states that the number of unemployed people in India is expected to rise from 17.7 million in 2016 to 18 million by 2018. The increase in the number of jobless people in India is part of a larger global dynamic. Globally, the ILO reckons that the number of unemployed people will increase by 3.4 million in 2017, with the pace of labour force growth outstripping job creation. "Economic growth continues to disappoint and underperform – both in terms of levels and the degree of inclusion. This paints a worrisome picture for the global economy and its ability to generate enough jobs, let alone quality jobs," said ILO Director-General Guy Ryder. Over the past three decades, the Indian government's economic policies have done little to mitigate the problem of jobless growth.
The country's famed demographic dividend is proving to be more of a curse than a boon. From 1991 to 2007, the ILO estimated that India's employment elasticity stood at 0.3. In other words, for every 1% of overall economic growth produced 0.3% of job growth. As per a recent HDFC Bank report, employment elasticity in the economy currently stands at 0.15. A contraction in manufacturing growth for the first time in seven years to -3.7% in 2015-16 and the recent decline in investment proposals in the last quarter could also have a deleterious impact on job creation.
What's worse, the assumption that greater injection of fresh capital investment, especially in the manufacturing sector, will spur job growth seems tenuous. Growing automation in the manufacturing sector further reduces the scope of employment generation. Why would a factory owner need to pay additional workers when a single machine can do the job? The Boston Consulting Group, an American global management consulting firm, believes that robots will do 40% of manufacturing tasks in the years to come. A booming manufacturing sector will contribute to higher growth, but not necessarily more jobs. In India, sales of robots for factories are increasing at a rapid pace.
Where does India start-up sector stand regarding job generation? The answer is not very high, considering how influential companies like Snapdeal issuing the proverbial pink slip to hundreds of people in recent months. Another e-commerce major Flipkart, meanwhile, has closed down their courier service and on-demand grocery delivery service less than a year after launching it, besides ordering massive layoffs. Even the likes of Zomato, Housing.com, and TinyOwl have resorted to mass layoffs. Companies are on a major cost-cutting spree while trying to save the money they have raised from investors. There are numerous other examples as well beyond Flipkart and Snapdeal.
Venture capital firms and other investors are unwilling to loosen their purse strings any further without any real returns. Techcircle, a tech business information website, reports that over 10,000 people have been laid off in the Indian startup ecosystem since August 2015. One major outcome of this growing uncertainty in the job market is the spurt in "non-standard forms of employment" like part-time work and contract labour. Under these conditions, workers are left vulnerable with little emphasis on protecting their health, assistance to the sick and disabled, offering maternity benefits, etc. These are indeed challenging times, and there seems to be little that our governments have done to address these concerns. Time is ticking.
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