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The trend of cutting jobs in businesses has been increasing in the last few years with the trend of automation and digitalization. According to an International Monetary Fund analysis, Generative Artificial Intelligence (AI) has become inevitable which will ‘impact approximately 40% of employment globally – replacing some and complementing others.’ According to Bloomberg, this is set to create a generative AI market of AI technologies like Google’s Bard and OpenAI’s ChatGPT worth $1.3 trillion by 2032. Technological advances in AI have resulted in significant changes in technology policy and the nature of jobs, particularly in the financial and technology sectors. The International Labor Organization’s World Employment and Social Outlook: Trends 2024 states that “accelerating technological progress is testing the resilience of labor markets”. However, other factors are also responsible for job cuts globally.
In a liberal market, competition and efficiency are key factors in the success of businesses. We are seeing a paradigm shift in business transformation led by innovative new technology and relevant policy regulation of AI. Governments in advanced and developing markets have initiated policies to promote the adoption of AI, recognizing the significant impacts of automation and AI on jobs.
To remain economically competitive and vibrant, industries are pushing for aggressive integration with AI. This calls for massive restructuring of their operating models through strategic restructuring to increase efficiency and quality. Cost-cutting measures become an essential part of the process that aims to achieve a lean organization, and hence, hiring and layoffs are long-term strategies – which is the trend towards job cuts in companies recently. Explains the rise in. Furthermore, integrating AI into businesses is an expensive solution that demands strategic use of resources.
United States (US)-based technology industries are leading the trend of job cuts and automation. A fresh look at labor data suggests the possibility of a job crisis. In January 2024, companies in the US are expected to cut 82,307 jobs, up 136% from the 34,817 cuts announced last month, according to global outplacement firm Challenger, Gray & Christmas. This is 20% less than the 102,943 cuts announced in January 2023. The Challenger report for January said ‘restructuring’ behind job cuts was the most cited reason by companies for 28,329 jobs cut due to company operations. Additionally, companies are expecting possible policy changes as 2024 is an election year that will impact industries. This was followed by plant and store closures – cutting 14,555 jobs, then AI – cutting 4,628 jobs through May 2023. The Challenger report confirms that “these layoffs are also driven by macroeconomic trends and a strategic shift toward increased automation.” The adoption of AI across various sectors, although in most cases, companies point to cost cutting as the main driver for layoffs. Sector-wise, financials and technology led the layoffs with 23,238 and 15,806 job cuts in January 2024, respectively.
In terms of companies, fintech companies like PayPal are looking to make their operations more streamlined, faster and more profitable to provide better customer experiences in the challenging macroeconomic conditions, according to FintechFutures News. Thus, the decision to cut staff by 9% during 2024 is to refocus on cost structure and consolidate its resources. It also reported that earlier this year, payments solutions provider Block decided to cut jobs by 10 percent of its total positions (about 1,000 people). Similar steps were taken by Brex and Toast – both US-based companies. Paris-based payments firm Worldline has decided to cut around 1,400 jobs across its core businesses in Germany due to the broader economic slowdown. Experts are expecting that the trend of staff reductions is likely to continue in 2024 as well.
The trend of business optimization is also given priority in other sectors. For example, the food industry and e-commerce are in the process of reshaping and restructuring by adopting automation technology. E-commerce mogul Amazon announces biggest-ever job cuts of over 27,000 across multiple Amazon departments by April 2023 Its latest layoffs are at its ‘Buy with Prime’ unit which comes on the heels of job cuts at Prime Video and Amazon MGM. Job cuts are made in parallel with appointment suspension. Similarly, in March last year, Facebook’s parent company Meta had announced to cut 10,000 jobs in the year 2023, according to CNN report. Earlier in November 2022, around 11,000 jobs were planned to be cut.
Macroeconomic challenges have also affected the banking sector. Deutsche Bank, which employs more than 90,000 people globally, has announced cuts of around 3,500 jobs over the next two years as part of its operational efficiency program worth €2.5 billion – aimed at de-commissioning some applications aims to improve its infrastructure and technology through the establishment of ‘. ‘Simplified workflows and automation’, and ‘front-to-back process redesign’, reports FintechFutures News. According to the Financial Times report, in 2023, the world’s 20 largest banks, including UBS, Wells Fargo, Credit Suisse, Citigroup and Goldman Sachs, will cut about 61,905 jobs, mainly due to lack of stability, investment and growth in the banking sector. In view of the company’s disclosures. According to BankingDive, other factors include a modest increase in headcount in 2021 due to the market recovery from the pandemic, which was later offset by an increase in mergers and acquisitions in the fourth quarter of 2023.
Now, AI is leading to a determined competition among tech companies at the expense of reducing the size of the workforce. As for smartphone companies, Nokia, facing stiff competition from popular demand for internet-enabled touchscreen smartphones like Apple’s iPhone and Samsung’s smartphones, decided to cut 8,000-14,000 jobs by 2026. In November 2023, ByteDance, TikTok’s China-based parent company, has decided to cut 1,000 jobs at its gaming unit, as per Nikkei Asia report. The move came after it invested $4.2 billion in 19 gaming companies struggling amid the global economic downturn. It will focus on short-video app TikTok and strengthen its language model, leveraging the technology used in chatbot ChatGPT. Australia’s Canva, an online graphic design tool, is focusing on AI-powered functions to give users a better experience, for example, an easy textual help format from presentations to executive summaries. Chinese e-commerce giant Alibaba has had to restructure by splitting into six main business groups, and its cloud unit, which provides the largest public cloud service, is facing competition from its rivals such as Huawei to cut some 235,216 jobs by March 2023. Was forced to make cuts, reports Nikkei Asia. Another example is the competition between Apple and Meta. According to CNN’s report, Apple’s core advertising sales business was affected due to Apple’s privacy changes and TikTok’s challenge.
In addition to emerging generic AI technologies as a reason for layoffs, geopolitical tensions have worsened macroeconomic conditions in advanced and emerging economies facing rising inflation and rising interest rates by central banks. According to the ILO’s Trends 2024 report, global industrial activity, investment and trade have been partly hit by slower growth in China, Turkey and Brazil. Layoffs could also mean a shortage of new technical skills that creates a barrier to entry for job seekers, while substantial financial resources are needed to develop broad-based technical skills that will respond to the COVID-19 pandemic and global have decreased due to the recession in the economy. The focus should be on upskilling and reskilling in tech-enabled tasks on AI interfaces, big data and cloud computing. However, tech investments are concentrated in a few tech giants such as Amazon, Google, Microsoft and Huawei. Furthermore, companies without enough skilled workers are unlikely to invest in new technologies – especially for entry-level positions in job markets. The report predicts the global labor market to remain weak, and thus, global unemployment to persist and reach a modest two million in 2024 (an increase of 0.1% from the previous year) due to low labor force participation and slow employment growth. is likely to increase.
Policy interventions must be in place to protect millions of vulnerable workers in the face of these disruptive mega-trends, prevent continued profit-driven job cuts, and bridge the skills gap in emerging technologies. In the context of establishing transparency in technological practices, the European Union (EU)’s Digital Services Act (DSA) came into force on February 17, 2024, across all online platforms, including marketplaces, social networks, content-sharing interfaces, and app stores. Protecting against illegal online content or disinformation and fundamental rights. This creates a fair and open online platform environment. This put TikTok under scrutiny, raising questions over its security measures to protect minors from potential online risks. In December 2023, X (formerly Twitter) was questioned over the spread of illegal content in the EU in the context of the Israel–Hamas conflict.
This article is written by Mehdi Hussain, Former Assistant Professor, Political Science, Kirori Mal College, New Delhi.
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