Chit Chat / Off Topic Discussions - IT boom and WFH impacts in COMMUNITY CENTER - Migrants Not all states (and not all cities within a state) have good economic progress to provide employment opportunity for ...
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IT boom and WFH impacts

  1. IT boom and WFH impacts

    Migrants

    Not all states (and not all cities within a state) have good economic progress to provide employment opportunity for the people locally. This resulted in many people migrating to major cities looking for employment opportunities. Some migrated to live the life of a metro/big city willingly while some migrated with no other option available locally for their own progress.

    I myself is a migrant (for education and then employment) for almost two decades now visiting my parents, who are living some 450KM (280 miles) away, once in a month or so. I joined a college in Chennai and got a job in a leading IT company. Four years of college and 15 years in job (12 years in IT field and last three years in job related to equity markets).

    Thriving ancillary opportunities

    With the rise of services sector in the country starting in 1990s led predominantly by IT, employment opportunities were plenty as long as you had a BE/B.Tech degree in any vertical. This helped uplifting of many low income families with their son/daughter getting jobs with salaries considered very high with onsite opportunities. (5 year experienced IT employee used to get the paycheck equivalent or more than 30 years experienced employee in other sectors). I'm talking about low and mid role employees. With rising income levels, purchasing power of families increased. White goods that are considered as luxury earlier become essential. Thanks to Bajaj Finance who identified this opportunity and empowered the middle/low income families with EMI, they have the first mover advantage and is one of the biggest wealth creators for its long terms investors with more than 100x returns.

    As many professional graduates shifting to major cities after getting placement out of college, realty market picked pace. Many high rise buildings came up and city limits were pushed out in all possible directions to accommodate the "migrants". When there is a construction activity, it provides business to a lot of sectors like,
    - cement
    - steel
    - ceramics
    - paints
    - FMEG
    - White goods/appliances
    - House financing (both banks and HFC)

    This in turn generated employment opportunities for many more people including the unskilled migrants from economically poorer states for construction activity. Such workers are mostly exploited mainly by agents or the employers (not all) by not adhering to available labour laws as they don't know their rights due to lack of education.

    Growth of IT services sector was so massive that at times, some call this sector as "back office of the world". Even the state governments hadn't anticipated such growth. City infrastructure couldn't cope with rise in migration. Traffic on city roads increased many fold. To avoid congestion, state governments started to have Special Economic Zones (SEZ) developed far away from city limits. Tax breaks were provided for IT companies for the revenue generated from such IT parks. This is to incentivise companies to shift out.

    Apart from realty market, auto industry gained the most as most had to commute long distances on a daily basis as IT offices were moved out of city limits. Due to overcrowded/lack of public transport and also due to affordability, mid and higher role employees started to travel by own cars to office. Entry level employees used bikes/motor cycles. Most took loans to buy the vehicle paying it off through EMI. Again, these increased the congestion prompting employers to arrange company transport for their employees. Even some tried carpooling (saving environment/cost). As the number of company transport buses increased, authorities even tried to regulate the timings in which it can ply on important roads. Such is the growth of sector and increase in migrants. Banks and auto finance companies thrived on this growth explosion.

    Financial sector gets affected the most both in economic boom and in recession. Apart from housing and auto loans, financial sector gained from personal loans. Margin is higher on this category as the loans are unsecured.

    Personal grooming is another space that saw good growth with people spending few times more than what they used to spend in their native place. It created good employment opportunities and good place for cosmetic products market.

    There should be more sectors that got indirectly benefitted from the booming IT services sector.

    Inflation

    As salaries are credited directly in employee bank account and expenses are paid through cards/wallet/UPI etc. in online mode, most of the people doesn't see printed money at all. Due to this, most doesn't understand how much more is spend than that is necessary. If the same amount of expenses is done in cash mode, most will think about it. Also, higher salary led to improved lifestyle which demands more expenses. Most of the employees don't even realise that they are getting into EMI trap on house loans, credit cards until they are fired. Such reckless spending will eventually have led to collapse of the family.

    The salary mismatch between IT and other sectors resulted in social inequalities. For instance, in housing societies, altercations became a regular affair in families who can't afford to have similar lifestyle of neighbour IT employee family.

    During the initial days of my career, I stayed in a rented house which is 5KM away from work place. I used to commute to office in public transport, mostly share auto. Fare used to be Rs.5 per ride (I'm talking in 2006 period). My IT office is the last destination for autos. Eventually in a year, fare increased more than two fold. I didn't feel the pinch for long until I overheard an argument between the auto driver and an old lady trying to get in. She wanted to get out mid-way but the driver demanded full fare saying she is occupying a seat which would have been taken by some IT employee giving him full fare. That old lady couldn't afford and got down from auto walking to the over crowded bus stop. It is then I realised the inflation that IT sector is imposing on others.

    Watch "Kattradhu Thamizh" movie (2007) directed by Ram which exactly captures the inflation issue caused by IT sector.

    Pandemic strikes

    Things were going fine until 2020, when a virus that originated from China (none know for sure how humans got infected first) spread across the globe with WHO declaring it a Pandemic. Covid-19 has wreaked havoc on livelihoods of many as governments across the globe went ahead with strict lockdowns not seen in a century to contain the spread of corona virus as there wasn't any other tool available.

    Locally, lockdown announcement, without giving any time to the public to prepare for it, caught most by surprise. Rather than shutting down the entire country, closure of all international travel from 1-Feb-2020 would have been a more sensible approach giving time for current dispensation to prepare for pandemic when it strikes locally and have controlled opening of international travel.

    Lockdowns forced migrants to flee metro/big cities, once seen as employment creating place, to their native place to be with their family during the difficult time of their life. Many walked on foot, some even few hundred miles, carrying their belongings/children, as there wasn't any other way to reach their homes. Some lost their life in this journey. Hardships faced by them can't be explained in words, even the enemies shouldn't face such situation.

    Rise in equity market

    Like a blessing in disguise, some sectors boomed during lockdown period. Food delivery as dining at restaurants were banned/IT sector as everyone moving online including education/broking sector as most had ample time at home.

    Equity markets had the fall of the decade on the potential impact to economy due to lockdown, mostly due to panic as last two generations wouldn't have seen a pandemic of this scale. There was risk off mode everywhere led to fall in equity and rise in safe havens, precious metals (gold/silver). As there was sudden loss of income to majority of the public, governments across the globe took stimulus measures to bring back growth. It includes direct cash transfer, tax breaks, relaxations on guidelines for credit availability etc.

    Stimulus measures taken by various governments and central banks along with savings at hands of public, markets started to rise again, not just to pre-covid levels, but to fresh record highs as people poured money into market at lower prices. Surge in direct retail participation was reported in various countries aided by work from home (WFH) culture.








  2. Work from home

    Work from home which was once denied for most citing data security reasons is the current way forward for the IT sector, as per top managements of big IT firms. WFH started as a temporary measure during lockdown. As the offices have centralised air conditioners and can become super spreaders of the virus, it was wise decision to close and allow for WFH rather than asking employees to report to office risking the project deliverables in case of virus spread causing quarantine of employees.

    Since most are confined to their homes, expenses dropped drastically as no more parties, no more movies, no more shopping mall visits, etc. This resulted in good savings in the hands of those who are not impacted by locked and continued to work from home, mostly IT sector. At least this should have made most to realise how much they were spending earlier unnecessarily. Big savings came in the form of rentals as most moved back to stay at native with their families.

    WFH has merits (like more savings, more time with family, flexible working, less travel/fuel, environment friendly etc.) and demerits (unwanted quarrel among family members for some, more work hours etc.). IT firms have sensed the amount of reduction in fixed costs by keeping office closed or operate with less head count. So logistics have been worked out to make maximum employees to continue work from home.

    Recession for ancillary sectors

    Some see this as a win-win situation for both IT employers and employee. This is in fact true. But one should see a bigger picture to understand the impact this is causing to overall economy.

    At the beginning of this write up, sectors that benefitted from IT boom will get impacted to some extent due to continued/permanent WFH for majority of employees. These are organised sectors and they can survive though there will be job losses and pay cuts for mid/low level employees. When income level is reduced, purchasing power is lost. With less demand, no economy can thrive with just lot of supply.

    WFH is actually a big hit for many unorganised small businesses. Taxi drivers who used to have back to back trips commuting employees between shifts now literally have no job. Auto drivers too has similar impact. Road side tea shops/bakeries/juice corners/chat shops have very less crowd that the owners find difficult even to break even daily making many to shut shop permanently. Many restaurants that used to host parties (IT employee have parties even for trivial reasons) were seeing good business earlier. Now they are also hardly hit. Requirement for formal dress have fallen drastically as people wear casuals at home and many garment shops are also impacted. Though the reduction in crowd can be attributed to fear in people getting infected currently, but when things settle down in next few years and if IT employees continue to WFH, these businesses will never be able to see the business at pre covid levels.

    Solution?

    The only thing that remains constant is change. As situations change, people change and so the society. People will get used to this WFH culture and employers will evolve ways to get work done remotely. When some lost business, some gained business. This will keep repeating itself again and again. But, is there a solution to provide some relief, even for short term, for these unorganised small businesses/ low and mid-levels employees at organised sector who got impacted on continued WFH of IT employees? A solution is must as this will have far reaching consequences not just economically, but can lead to social unrest too.

    government can direct at least 75% of employees to report to work and eventually allow permanent WFH in a gradual manner so the impact felt by impacted section can be lived with as they find alternate ways of employment/business, OR
    remove all tax breaks enjoyed by IT firms for the revenue generated by projects run from SEZ, using them to a dedicated fund focused on these impacted section of people for at least 5 years, OR
    if the IT firms incur additional cost of X amount by making majority to report to office, let government consider that X amount towards mandated Corporate Social Responsibility (CSR)

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