The Economics behind Global Layoffs

By Shriya Vora | Edited by Ikshita Jain

News of various reputed companies firing not hundreds but thousands of employees, is a cause of concern for the world economy. Employees fear that they will be the next to lose their jobs amidst such a volatile job market. It is no joke to hear about profitable companies having astounding cash flows and securities making the decision of not hiring as well as letting employees go. This seems to have become a trend in the past few months and such devastating actions haven’t come to a halt yet. What exactly is the reason for such well-established money-backed companies to lay off thousands of employees?

The horrifying yet realistic statistics:

Out of the many different kinds of companies, tech giants seem to be winning the race of mass layoffs worldwide, especially U.S based multinational companies. According to, with around 1044 tech companies laying off 1,59,846  workers in 2022, Amazon is at the top with foregoing 18,000 people followed by Alphabet, Meta, and Microsoft at 12,000, 11,000, and 10,000 respectively. The chart below shows the list of top tech companies and the number of employees that it has foregone as of January, 2023. Alphabet, Google’s parent company, was the latest to join the extensive list. Companies apart from the tech firms that announced massive lay-offs include financial ventures like Citi, Morgan Stanley, and Goldman Sachs as well as entertainment platforms like Disney. Indian companies and start-ups seem to follow the trend as well. According to Inc42, 67 businesses, including unicorns BYJU’S, Chargebee, Cars24, LEAD, Ola, OYO, Meesho, MPL, Innovaccer, Udaan, Unacademy, and Vedantu, have so far collectively laid off 21,532 people. Infosys co-founder contended that “while lay-offs are undesirable, they can’t be avoided.”

Source: The Economic Times

The fear of recession:

The major reason for such mass layoffs is the recession, expected in the coming months, and also currently being faced by many countries. A recession is a period of less output, less consumer spending, and unemployment. In a period of recession, companies face a decline in sales and profits. With no extra profits and minimal sales, having a huge number of employees is not beneficial for them. Where would they get the money to pay the employees in such tough times? Hence, firms engage in cost-cutting activities and the best way to do that is to lay off employees. This will reduce the operating costs of the companies and possibly help them to recover from the slowdown. Several economists and international agencies like World Bank and International Monetary Fund have anticipated that a recession is underway and have warned the countries to keep their economies in check which has led to the adoption of tight monetary policies. The countries that will face this more extensively include the USA, China, the UK, Germany, Japan, etc. 

Demand Drop and faulty decision:

More recently, the central banks of various countries can be seen increasing the interest rates to keep inflation in check. Even the Reserve Bank of India on February 8th announced an increase in the repo rate by 25 basis points, which now stands at 6.50%. Various companies publicly proclaimed that over the two years of the pandemic, dynamic yet wavering growth could be seen. The demand for various products had risen globally in 2020 and 2021 when people were confined to their homes. They indulged in massive spending habits, especially for tech products, and the e-commerce sector grew widely. This drove top companies to hire at large and increase their investments without carefully assessing their revenues. Such decisions, although beneficial during those promising economic times, prove to be a burden. 

Companies like Spotify, Stripe, Amazon, and Salesforce apologized and acknowledged the fact that their hasty decisions of hiring numerous workers during the pandemic and increasing investments have led them to forego employees in the interest of prioritizing their businesses.  In response to explaining why such mass layoffs were in place, Google put out a statement mentioning that “Over the past two years we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today.” Moreover, Google cited the withdrawal of investors in such a gloomy economic period to be one of the causes of the mass dismissal. The companies expected to enter into a period of a slowdown are taking such excruciating steps to avoid bankruptcy as well as to maintain a strong financial standing during future downturns.

Boon or bane for the companies?:

Another thing to note here is that these layoffs don’t come without a price to the companies. Layoffs, similar to hiring, incur huge costs to the companies. So why would companies indulge in such cost-infuriating activities? The simple reason behind this twisted trend is that layoffs are a one-time cost. The costs of firing employees are far less than the anticipated costs of keeping those workers whilst entering into a recession. Nevertheless, this doesn’t necessarily mean the relatively stable companies during the downturn won’t face hardships when the economy is healthy. The talent that has been lost due to layoffs can lead to much higher costs later when the times are good and the companies need to expand on skillful workers. 

The socio-economic impact:

Global layoffs can have a devastating impact on people. Numerous laid-off employees complain of uncertainties regarding their next job. Moreover, they are finding it very difficult to sustain their livelihood in these unpredictable times when even major firms are on hiring freezes. The repercussions of such unemployment can be the cause of an increase in stress and mental health issues as well as suicide in various countries.

The U.S. tech industry has been the most profitable job market for Indians for quite a long time and continues to do so. Several Indians are employed as different kinds of engineers in top U.S firms. As per some industry insiders, between 30% to 40% of those laid off are Indian IT professionals, a significant number of whom are on H-1B and L1 visas(Munjal, 2023). If they fail to acquire a job in the stipulated time according to their visas, they will be required to come back to India. This will prove to be a burden on the Indian economy as well.

The future:

As mentioned earlier, people all over the world are expecting to enter into a recessionary phase which won’t prove to be instrumental for the job market. It is forecasted if such trends continue then more people could face the rather terrifying effects of unemployment. More layoffs are expected in the coming years. The situation only seems to get worse with the Ukraine-Russia war and the persistent COVID-19 consequences affecting the global economy. 

Nevertheless, the entirety of the situation can be spun around if the downsized employees are self-incentivized to make extraordinary contributions to the economy. More often than not, it is times like these that have provoked the establishment of new ventures, proving to be beneficial for the economy in the long run.


Popli, N. (2022, November 10). What layoffs at Meta and Twitter mean for the U.S. economy. Time. Retrieved February 13, 2023, from

Chandwani, S. (2022, November 21). 2022 tech layoffs: What does the wave of layoffs mean for the economy. Inc42 Media. Retrieved February 13, 2023, from

Munjal, D. (2023, February 2). Explained: What does the recent wave of tech layoffs mean? . The Hindu. Retrieved February 13, 2023, from

Lopatto, E. (2023, January 26). Why are so many tech companies laying people off right now? The Verge. Retrieved February 13, 2023, from


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