Jakarta. Major tech companies are not providing job security, with a shocking 262,595 tech employees worldwide experiencing layoffs in 2023. The trend continues in early 2024, with an additional 23,770 employees already losing their jobs.

Indonesia is not an exception. Tech giant GoTo Gojek Tokopedia announced the termination of 600 employees in March 2023. This decision came after GoTo had previously laid off 1,300 employees in 2022.

In August 2023, Bukalapak also resorted to layoffs, affecting less than 5 percent of its total workforce. Other tech companies that have undergone layoffs include Carsome Group, Rumah.com, Halodoc, Pluang, Lamudi, and even Shopee. 

This year, fintech startup Xendit laid off some of its employees, following in the footsteps of startups Lazada and Zenius, which closed their operations after two decades.

Nailul Huda, the Director of Digital Economy at the Center of Economic and Law Studies (Celios), sheds light on the factors contributing to the ongoing wave of layoffs in the tech industry, also known as "the tech winter." He predicts that the wave of job terminations is likely to continue in 2024 due to three main factors.

Firstly, massive hiring initiatives conducted by startups and tech companies during the Covid-19 pandemic, often with high salary offers, have strained financial sustainability. The rapid growth in the tech sector during the pandemic led to a surge in recruitment, disregarding the potential decline in future funding.

"During the pandemic, the technology sector grew rapidly due to restrictions on public activities. Tech companies then recruited many employees, even paying them high salaries. They did not consider that fundraising in the future could decline," explains Nailul Huda.

Secondly, the continuous decline in funding for startups and tech companies has necessitated efficiency measures. In 2021, digital sector investments in Indonesia amounted to approximately Rp 150 trillion ($9.5 billion), but this figure plummeted to around Rp 56 trillion in 2022. By 2023, the investment had further decreased to less than Rp 30 trillion.

"The average investment in the digital sector is around Rp 60 trillion per year, but it nearly tripled in 2021 during the pandemic. Many companies used these funds for expansion, including hiring more employees. However, in the following years, the incoming investments declined," Huda remarks.

According to Huda, the continuing downward trend in investments is attributed to the high interest rates set by The Federal Reserve. Foreign investors, who make up a significant portion of the investors, are becoming more realistic in seeking promising and safer investments.

"Rather than putting their money into digital companies with high risks, investors prefer to keep their funds or invest in other more profitable investment portfolios, especially when The Fed interest rates are high," Huda adds.

Thirdly, many tech companies are shifting their investment focus to artificial intelligence (AI). The emergence of AI technology is believed to replace numerous jobs, prompting companies to reduce their workforce.

"With the presence of AI technology, some jobs are slightly threatened," notes Huda.