Navigating Through LayOffs, Rising Interest Rates, and Chaos

A month back businesses were struggling with the Great Resignation wave, leading to hikes in salaries, mismatch of expectations, and funding rounds. Now as the Central Banks around the world start to bring back the market to its equilibrium, trying to stop the boiling inflation before it overflows by increasing the interest rates, we see a wave of layoffs. So what is exactly happening and how can you as an employee navigate through it?

Let’s first understand the situation in simple terms. Sometime back the stimulus, and efforts of the central bank to wake up the economy from its pandemic slack led to an injection of liquidity in the market. Soon the Russia-Ukraine war led to high commodity prices (especially oil), and the trickling effect of stimulus meant a mismatch of demand and supply which in turn led to inflation. Now in the past two years, as borrowing was relatively cheaper, in India the startup ecosystem flourished, received huge funding, grew big, and hired a lot of people. 

Now that the Central Bank increases the interest rates, the cost of borrowing rises, so the investors become more discerning with their investments. At the same time, the cost of raw materials has risen, one due to the hike in oil because of shortages and the other due to inflation. Over and above as inflation rises, consumers reduce their spending. So currently businesses are facing a twin problem of reduction in demand, as well as an increase in the cost of raw materials and capital. Hence, the margins shrink, businesses shrink, and the people who were hired without planning have to be laid off in order to sustain the business.  

Current economic conditions and happenings are a result of excess liquidity, bad workforce planning, war, pandemic, their consequences, and the interplay of many other factors. Hence the realignment of the national and global economy will be a slow process and inevitably hurt individuals financially during its course. So how can you as an individual minimise the effects? Here are some ways you can do it:-

  • Reskill and Upskill: As the companies look to cut costs, the best way to keep your job and get better at what you’re doing is by upskilling and reskilling yourself.
  • Networking: Even if say you lose one job due to the layoffs, a good network can help you find another in relatively less time
  • Keep up the Motivation: Know that the reason behind layoffs is not your individual inability to perform, but rather unplanned hiring in past, and economic fluctuations. Hence, believe in your skills and give your best.
  • Soft Skills and Emotional Intelligence: The financial benefit that the company accrues from individuals’ soft skills and emotional intelligence are unmatched and hence working on these qualities makes you very difficult to replace.
  • Save More: As the interest rates rise, it also means that the interest return from saving in Bonds, Fixed Deposits, etc will also rise. 
  • Minimize Borrowing: Keep your borrowing to the minimum, as the cost of borrowing has and will continue to rise in the near future.
  • Cut Down on Unnecessary Spending: As the inflation rate will take some time to stabilize, items will become expensive, hence abstain from buying things that are not an immediate need

Every economic cycle can be taken advantage of if you look for the opportunities it presents. This is the time for employees to strengthen skills and confidence in such a way that they are unperturbed by what external forces send their way because good talent will always be in demand as that is what makes the organizations. Plus this is a great time to invest your earnings in safe instruments, as not only will they help you grow your money but also help you build an emergency fund for a rainy day.

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