The current job market is changing at a rapid pace, and the future of it also looks highly uncertain, taking the current times into consideration. Recent reports say about 25 percent of jobs will be at risk in the coming five years. AI has created a crisis among the working class; most people are scared of losing their jobs to AI.
AI is becoming prominent across different industries, and most mundane manual tasks are being transferred to AI. Because of the current unstable financial situation, most major corporations are downsizing their employees; they are either planning a hiring freeze or removing jobs. Geoffrey Hinton, who is said to be the Godfather of AI, quits his job at Google to warn people about AI. “AI could kill many jobs,” he says.
What is a Hiring Freeze?
A hiring freeze is when a company pauses hiring new candidates to reduce costs. The company stops creating new jobs during a hiring freeze to save costs. It generally occurs in situations like budget constraints, downturns, or restructuring. Although a hiring freeze can reduce the costs for the organization and improve financial stability, it can increase stress for the existing employees and decrease productivity.
Why Do Companies Implement Hiring Freezes?
Companies implement hiring freezes to preserve company finances and for smooth business operations. A hiring freeze is a measure they take to address a crisis in the business.
Here are a few reasons why companies implement hiring freezes.
Organizational Restructuring
The organizations can also implement a hiring freeze as part of a more extensive corporate restructuring. The restructuring may include consolidating departments, eliminating positions, or shifting the focus of the business. During a restructuring, a hiring freeze will help the organization realign its workforce, understand its priorities, and streamline its operations.
Economic Downturn
Another primary reason for implementing a hiring freeze may be because of an economic downturn. When the company is experiencing a decline in revenue or profitability, in that case, the organization may need to cut costs and conserve resources to weather the economic storm. A hiring freeze can help the company avoid layoffs and other cost-cutting measures.
Merger or Acquisition
When a company goes through an acquisition or merger, there may be a need to integrate two workforces into one. During this process, the company may implement a hiring freeze to ensure it has the right number and type of employees to support the new business model.
Recession
Another major reason that can force companies to implement a hiring freeze is a recession. Recession always brings a major decline in business activity. As companies see a reduction in customer spending, they must find other ways to reduce costs and conserve their resources. With a hiring freeze in place, they can reduce costs relating to hiring and training employees and use those resources on more urgent needs.
Industry-Specific Factors
Hiring freezes can be industry-specific and driven by external factors such as government regulations, market conditions, or technological changes. For example, a hiring freeze in the healthcare industry could be due to changes in reimbursement policies or a shortage of qualified healthcare professionals.
Hospitality
One of the industries that suffered during the pandemic is the hospitality industry. The hospitality industry was hit hard by travel restrictions, lockdowns, and decreased consumer spending. Many hotels, restaurants, and other hospitality businesses implemented hiring freezes to reduce costs and survive the downturn in business. It was unclear when the restriction would be lifted and everything would return to normal, so the companies could only control costs by implementing a hiring freeze.
Airlines
Similar to the hospitality industry, the airline industry also faced a significant decline in business due to the pandemic. Many airlines implemented hiring freezes to reduce costs and conserve resources.
Technology
While the technology industry has been relatively resilient during the pandemic, some companies have implemented hiring freezes due to the economic uncertainty caused by the pandemic. A few tech companies have faced increased scrutiny over their hiring practices, leading to more cautious approaches to hiring. Lately, IBM announced a hiring freeze that replaces 7800 jobs with AI.
Retail
With online shopping, the demographic that visits brick-and-motor stores has steadily declined in the past few years. This has caused retail companies to implement a hiring freeze and utilize those resources to launch their online stores.
Wrapping Up
Although AI could help people improve productivity and efficiency, AI is soon taking over thousands of jobs. AI tools such as ChatGPT have already started to create an impact on many jobs. These AI tools are being used to write codes, detect bugs, copywriting, provide customer support etc. Experts expect that AI will soon make a dramatic change in most industries and make a trigger warning to workers.
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