TCS, India’s largest technology company and a symbol of the sector’s seemingly perpetual growth, recently announced it would reduce its workforce by roughly 2% over the coming year. The decision to lay off approximately 12,000 employees, primarily middle managers, has sparked predictable outrage and doom-laden commentary across social media and business circles.
Yet, the reaction itself reveals a fundamental misunderstanding about how modern economies function. For decades, the technology sector in India operated under an unusual paradigm. Companies hired aggressively, rarely fired anyone, and employees enjoyed something approaching the job security, which previous generations associated with government employment. This created a dangerous illusion that private sector salaries could somehow coexist with public sector job guarantees.Adapting to new situationsEmployment instability isn’t an aberration in market economies; it’s a feature, not a bug. The same competitive forces that drive innovation, efficiency, and higher wages also create periods of adjustment, during which companies must shed excess capacity. This isn’t necessarily cruel or shortsighted; it’s the way resources are reallocated from less productive uses to more productive ones. If a company like TCS fails to adapt to a changing world, it’ll be dead sooner rather than later.
Six years ago, I wrote about this very issue in a column titled, ‘Your investments diversify your life’. The central argument was that beyond diversifying your investment portfolio, you must diversify your life itself. I pointed to the example of a couple who worked in the technology field, held significant employee stock options in their company, and invested heavily in other technology stocks. When their industry hit turbulence, they discovered that their career prospects and investment returns were catastrophically correlated. Their lack of life diversification had left them vulnerable in ways that traditional portfolio diversification couldn’t address.
More fundamentally, every household needs to prepare for employment disruption, regardless of how secure their current position appears. This preparation begins with the most basic financial tool: an emergency fund. Six to 12 months of household expenses, kept in liquid, easily accessible savings, should be non-negotiable for anyone drawing a salary. This isn’t pessimism; it’s prudence.
Addressing diverse needsThe calculation becomes slightly complex when you factor in other variables. If both spouses work, particularly in different sectors, the household can probably manage with a smaller emergency fund. If you own your house, your monthly cash requirements are lower than someone paying rent or a home loan EMI. If you’re debt-free, you have more flexibility than someone servicing multiple loans.
This brings us to lifestyle choices that make households more resilient to employment shocks. The biggest vulnerability many middle-class families face isn’t inadequate income; it’s excessive fixed costs. When your monthly outflows include large EMIs for cars, consumer loans, credit card payments, and lifestyle expenses that feel essential but aren’t, you’ve created a financial structure that depends on uninterrupted income.
Building flexibilityThe math is unforgiving. If your household spends 90% of its income, losing a job becomes a crisis. If you’ve structured your life to pay 60% of your income, the same job loss becomes a manageable inconvenience. The difference isn’t just the emergency fund you’ve accumulated but the flexibility you’ve built into your monthly cash flow.
This doesn’t mean living like a pauper or avoiding all debt. It means being thoughtful about the fixed commitments you take on and honest about the stability of the income stream supporting them. A small car loan might make sense; financing a luxury car might not. A home loan aligned with your income is reasonable; stretching to buy the largest possible apartment creates unnecessary vulnerability.
The TCS announcement should serve as a wake-up call, not just for technology workers but for anyone who has convinced himself that his employment is guaranteed. In a dynamic economy, no job is permanent and no sector is recession-proof.
The question isn’t whether disruption will come, but whether you’ll be financially prepared when it does.
Rather than raging against market realities, the sensible response is to build financial buffers that make those realities manageable. Emergency funds, diversified investments, reasonable debt levels, and lifestyle flexibility aren’t just nice-to-know financial concepts. They are essential survival tools.
The author is CEO, VALUE RESEARCH
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)