Are we facing another major economic disruption after COVID?
This is an article ‘Are we facing another major economic disruption after COVID?’ by Marc Primo
As the war on Ukraine rages on, affecting an already pandemic-laden global economy and causing sudden inflation, a new 'catastrophe' is emerging in the form of employment shortages, according to US Secretary of Labor Marty Walsh. With tech giants like Twitter and Meta issuing pink slips by the thousands, will the Great Resignation of 2021 pay off for today's younger generations of professionals, or will increasing labor cost cuts among companies put more people out in the cold?
As pointed out in a recent business survey, more than half of today's largest employers are strongly considering significant cutbacks on labor costs due to the current economic downturn. While the federal government still sees a silver lining in employment growth until early next year, Secretary Walsh has reported that more employees are preparing to look for alternative income and better jobs.
Higher unemployment expected
In terms of maintaining the Federal Reserve, mass layoffs are one dire solution that can bring economic turmoil caused by sudden and prolonged inflation back on its feet. Currently at 3.5%, the country's unemployment rate is expected to dive into a 4.4% outcome, given the government's mitigating measures on inflationary pressures via policy and higher interest rates.
Ahead of the infamous Twitter and Meta layoffs in this year's third quarter, Walmart and Disney went ahead of everyone in furloughing thousands of their employees. One House study says there were as many as 100,000 employees displaced, and ten other companies considered the country's largest followed suit. The reported companies with massive layoffs were AT&T, Berkshire Hathaway, Boeing, Chevron, Cisco, Citigroup, Comcast, Exxon Mobil, Oracle, and Salesforce.
Though workers remain positive given the government's infrastructure act that maintains job growth in various sectors, the difficulties in battling inflation call for income adjustments so that people can shoulder the rising costs. Driving more US citizens to reach the middle class through viable income opportunities is what is on the government's mind, which entails a federal minimum wage increase, childcare support, and policies centering on today's flourishing gig economy.
However, each issue needs to be approved by Capitol Hill. The pending problem is that important legislation for increasing minimum pay remains uncertain as the Senate put the matter on hold and shifted its focus to the recent midterm elections.
Left and right mass layoffs
While the current job market and job growth in the country remain strong, more companies might resort to mass layoffs in the future, considering the impact of the recession. In simpler terms, a company that separates from more than 50 employees in a month constitutes a mass layoff, which is happening in more big-name brands now.
Aside from Twitter and Meta, more companies are trying to curb the labor cost quagmire. Tech and e-commerce giant Amazon started retrenching at least 1% or 10,000 of its global workforce, including 3% of its corporate employees. Real estate marketplace Zillow laid off 300 employees last month, while streaming service Netflix went separate ways with 150 employees due to business needs. Add Snapchat, Soundcloud, Opensea, Peloton, and Masterclass to the list, all of which furloughed 20% of their workforce as early as February.
What may be the most critical news about mass layoffs came when Twitter, under the new management of tech bad boy Elon Musk, started an exodus of more than 50% of its entire workforce or 3,700 employees early this month. Soon to follow was Zuckerberg's Meta, itself troubled by billions of revenue losses this year, which laid off 13% of its workforce or 11,000 heads. The troubling thing that spells Walsh's prediction of a catastrophe is how more large-scale companies plan to lay off workers in the coming months.
What should laid-off workers do?
While abruptly laid-off employees can experience overwhelming bouts of depression, anxiety, and uncertainty, it's essential to keep an eye on the ball about what they should do to receive just compensation.
Filing for unemployment is the first essential thing laid-off workers should do, followed by a review of available healthcare options they can take while out of a job. Some workers covered by their employers for a particular time after separation still have to consider their options regarding securing healthcare coverage.
Lastly, it's essential to check whether employees have access to their 401k contribution plans, which they can cash out, albeit with accompanying penalties. The best thing to do when dealing with 401k plans is to consult a licensed financial expert first to consider the best options.
After reviewing all the technical aspects for compensation eligibility, laid-off workers should look into available contractor or independent job options they can take while out of corporate jobs. Right now, the gig economy is the only one pulling off an upward trajectory, with more than 30 million workers worldwide sharing a slice of the pie. Opting for independent work already proves to be appealing to around 16% of the entire population in the country. The numbers continue to rise, signaling steady growth in various niche markets.
Addressing the situation
On the government's part, policies covering the gig economy are on the drawing board to provide more available jobs for laid-off workers, primarily targeting positions via Uber, Lyft, Doordash, or other similar service models. Proposals are currently in the legislative and public review stages to ensure that independent contractors receive proper compensation and benefits.
Secretary Walsh also conveyed that public support for Unionization remains strong and prepped for a 2023 or 2024 implementation. According to the Bureau of Labor and Statistics, available jobs declined by 240,000 last year. With better unionization policies, employees can see better security of tenure, collective bargaining agreements, and overall organization with employers.
American analytics and advisory company Gallup reported that public approval for labor unions hasn't been as strong today as in 1965. If 58% of the country's non-union employees join unions, only then can employees regain bargaining power among their employers and gain long-term job security with better pay.