Would the great resignation become the great entrenchment?


We live in troubling times.

As the world reopens as governments in most countries shift from a Zero-COVID-19 strategy to Living With COVID-19, 2022 was expected to be a better year for the job market and people. jobseekers.

Instead, what we’ve seen in the first half of 2022 is a wave of pullback exercises across many industries. While job cuts in industries like cryptocurrency (Coinbase, Crypto.com, Gemini) are understandable given the “Crypto Winter” being talked about, job cuts in other industries like e- commerce (Shopee), electric vehicles (Tesla) and finance (Stashaway, iPrice) are a bigger surprise.

After all, most tech companies have already seen phenomenal growth over the past two years despite the pandemic and should be, at least, stronger than they were before.

And even if the expected growth is slower now than it has been for the past two years, e-commerce, electric vehicles and the financial industry are surely not going away anytime soon. It’s not like we’re talking about healthcare or rubber companies here.

So what has changed?

The story so far

There has been a confluence of reasons that have led to the recent downturn in some of the largest and fastest growing sectors. In the United States, inflation is at its highest level since 1981. This prompted the Federal Reserve to raise interest rates to curb inflation (and growth). The logic here is that if interest rates rise, companies are less likely to borrow and grow, which should help reduce inflation.

Elon Musk, whose company Tesla is down about 45% and now trading at around $650, down from $1,200 at the start of 2022, shared (per Reuters) that he has a “super bad feeling” at about the economy and told his team at Tesla “to suspend all hiring globally.” And being one of the biggest proponents of growth companies, it’s certainly a view that other similar growth companies can’t afford to reject.

The simple fact is that to combat a potential COVID-19 recession, the US Federal Reserve has taken extraordinary measures to mitigate the economic fallout and support the economy. This took the form of an aggressive quantitative easing program, where interest rates were at near-zero levels to encourage businesses to borrow, expand and hire workers. At the individual level, unemployment benefits were paid, likely fueling some of the reasons that led to the big resignation.

In Singapore, we see similar initiatives. While individuals are receiving financial support such as the Temporary Relief Fund and the COVID-19 Support Grant, businesses have benefited from grants such as the Job Support Scheme (JSS) and the Growth Incentive employment (JGI). These were programs intended to encourage companies not only to retain workers (JSS), but also to encourage them to hire more people during a time when the government was rightly worried about unemployment.

Unsurprisingly, it was the fast-growing, well-funded companies backed by venture capital that rose to the occasion to capitalize on this opportunity (if you were a restaurant in 2020, hiring would be one of the last things you you think). In addition to a low cost of capital that these companies can access through their venture capitalists, they also receive government subsidies for their full-time hires.

Are the good times over?

Think about it. For anyone who found a new full-time job in 2020, you are unlikely to have found a job in industries such as restaurants, hotels, or tourism, as those industries weren’t even hiring.

On the contrary, a job obtained in 2020 would probably be a work from home in a technological and digital role. And that expansion is likely supported by the generous QE and grant programs around the world.

But now, to curb inflation and because subsidies can’t last forever, many companies that might have (over)expanded in the past two years are taking a step back to focus on sustainability and solidify their growth. And that, unfortunately, may mean having to reduce the number of people.

Out of curiosity, I went to research headcount growth over the past couple of years for some of the companies that are currently folding.

Coinbase – Early 2021: 1,250 employees. Currently about 5,000 employees. They quadrupled their workforce in less than 2 years.

Crypto.com – In a blog entry, they said they had about 900 employees in February 2021 and about 250 employees before the previous 12 months. Today, they have around 4,000 employees.

You’re here – Had 48,016 full-time employees at the end of 2019, 70,757 at the end of 2020 and 99,290 at the end of 2021. (Source, Source)

Sea (parent company of Shopee) – 29,800 in 2019, 33,800 in 2020 and 67,300 in 2021 (Source)

The point here is that for many of the job cuts we’re seeing right now, it looks like they’re jobs that could have been created in the last couple of years, possibly induced by the Liberal QE measures , low interest rates and easy access to venture capital funds and government job subsidies.

And now that these easy sources of funding are no longer available, these jobs may no longer be maintained, we could just see the Great Resignation become the Great Retrenchment.

Also read: Are Singapore workers part of the big quit?

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