The nation’s biggest telecommunications provider has taken the axe to close to 10 per cent of its 31,000-strong workforce.
Some 377 jobs will go immediately, with a total of 2,800 jobs gone by the end of December.
“This is a hard day for many of our teams right across Telstra,” CEO Vicki Brady said as she broke the news.
Telstra’s got a rather large problem.
Many of its big corporate customers are shifting away from traditional voice calls to cheaper internet-based services provided by software companies.
The tech firms that compete with Telstra also allow businesses to manage more data — and at a lower cost.
In order to compete in the sector, analysts say Telstra will employ more robots and fewer humans.
“AI and cloud computing and robots, you know they can be far more efficient and effective in the network,” telecommunications consultant Paul Budde said.
“So therefore, what you start seeing is absolutely replacing humans [with] this new technology … that is seriously happening.”
A look into a ‘scary’ future
The bottom line is that Telstra wants to make more money and part of that is slashing costs.
Telstra said by “simplifying” its operations and cutting staff, it’ll save $350 million.
Whenever mass sackings are announced it’s only natural to wonder if it’s isolated to one firm or part of a growing trend within corporate Australia.
So, what’s the risk of this kind of business decision being repeated elsewhere, in another major company?
Budde said it is a risk — and “it’s a bit scary”.
“It’s necessary to be more efficient, more productive, more effective,” he said.
“On the other side … we don’t really know what’s happening and how this is going to evolve.”
The toll this will take on families and those who will struggle to find other work wasn’t lost on the Treasurer Jim Chalmers.
“I think this is a very distressing day for a lot of people who have received this bad news from Telstra,” he said.
“And we’re thinking of all the families who are impacted by these big job cuts at a major Australian employer.
“We will be seeking advice from the ACCC about some of the claims Telstra is making about their new pricing strategy and the role of the NBN.”
But look again at the treasurer’s first phrase: “I think this is very distressing for a lot of people.”
It’s not every day a treasurer would concede this and it’s alarming.
Cracks are appearing in the job market
The problem with mass sackings is that there’s potential for them to feed on themselves.
A few redundancies here or there are not going to affect what economists call “aggregate demand” in the economy, but several mass sackings would.
And, all else being equal, it would lead to a surge in the unemployment rate and a recession.
Professor John Buchanan, from the University of Sydney’s business school, does not think Telstra’s job cuts point to a sudden spike in the unemployment rate, but he warns the “cracks” in the jobs market are becoming “more evident”.
“In this case, I think there are deeper structural changes at work: changes in technology, changes with new providers into the space Telstra operates in,” he said.
“It’s more a question of tech change than a cyclical downturn … [but] just because the source is structural and not cyclical doesn’t mean it’s [not] serious.
“In a sense, the underlying demand for labour has hidden some of these deep structural changes which have been going on under the surface.
“As the labour market softens these things become starker.”
In other words, more companies increasingly need to be nimble, and that may mean more painful restructures like the one initiated by Telstra this week.
It’s becoming harder to find work
Earlier this month the Bureau of Statistics reported the unemployment rate had risen from a revised 3.9 per cent in March to 4.1 per cent in April.
While the jobless rate has been volatile over the past six months, trend unemployment is rising — and economists have warned it’s therefore becoming harder to find work.
Leonora Risse, an Associate Professor in economics at the University of Canberra, said that’s the sting for Telstra workers whose positions at the telco have been made redundant.
She said it will now be harder for those workers to find another role than it would have been, say, late last year.
To avoid getting the tap on the shoulder, Risse said workers may need to re-skill to stay in demand.
“Companies are continually growing and needing greater, higher level skills,” she said.
“So jobs like data analyst, cyber security expertise — these are some of the areas that are really growing and expanding.”
“What’s really important then is that we support workers to upskill, reskill, transfer and move into these new and growing opportunities.”
But not everyone has the money or the time to retrain.
Spare a thought for the over 300 Telstra workers today who no longer have a job — I imagine many of them are still recovering from the shock.