India and the Philippines, global leaders in IT outsourcing, are facing a direct hit from the spread of artificial intelligence (AI). With routine tasks such as simple coding and customer service being rapidly automated, forecasts indicate that hundreds of thousands of people in both countries may lose their jobs.
According to industry sources on the 27th, there have already been large-scale restructuring efforts in the IT and Business Process Outsourcing (BPO) industries in India and the Philippines. In India, Tata Consultancy Services (TCS) announced earlier this month that it would reduce its workforce by 12,000 employees, which accounts for about 2% of its total workforce. The American big tech company Oracle is also cutting 10% of its employees in India and significantly downsizing its software development, cloud service, and customer support sectors.
While the justification is 'restructuring,' the industry analyzes that roles susceptible to AI replacement have taken the hardest hit. Local consulting firms, such as UnearthInsight, warn that up to 500,000 people could lose their jobs in India's IT industry within the next 2 to 3 years.
The IT service industry is a core pillar of the Indian economy. According to the National Association of Software and Service Companies (NASSCOM), it employed about 5.67 million people as of March this year and accounts for over 7% of the gross domestic product (GDP). However, as AI is introduced into coding, testing, and customer support, the structure of the industry is being shaken. Sonal Verma, chief economist at Nomura, stated in a recent interview with CNBC that 'the introduction of AI is India's biggest challenge' and that 'simple jobs will disappear, and middle management positions are also facing pressure to change.'
The absence of labor rights is also a cause for concern. The International Trade Union Confederation (ITUC) classified India as the lowest-ranked country for labor rights protection. Rajendra Acharya, regional director of the International Federation of Workers' Unions, noted that 'if workers' voices are excluded during the AI implementation process, inequality and job insecurity will deepen.'
The situation is no different in the Philippines. The Philippines is a global call center hub based on a BPO industry that employs 1.5 to 1.7 million people, constituting 8 to 10% of its GDP. However, roles such as customer counseling, data entry, and quality control are being quickly replaced by AI automation. A survey released last month by the Information Technology and Business Process Association of the Philippines (IBPAP) revealed that more than half of responding companies are aggressively adopting AI, with 10% already having fully implemented it. It is projected that 20 to 40% of total call center jobs may disappear, potentially affecting up to 800,000 individuals.
Global outsourcing corporation Boulder projected that 'the BPO industry will not be a model that hires hundreds of thousands but will reorganize around technical personnel who can collaborate with AI.' However, the non-union structure of the Philippine BPO also makes it vulnerable to layoffs. According to the local labor organization BPO Industry Employees' Network (BIEN), call center workers are easily laid off for underperformance, and during the transition to AI, retraining and labor rights protection should be implemented together.
Amid these concerns, both governments are also coming up with countermeasures. The Indian government is expanding AI education for youth with the support of Google.org and the Asian Development Bank (ADB), while the Philippines is promoting retraining and capacity-building programs in data science and programming centered around IBPAP. However, the industry analysis suggests that 'beyond simply utilizing AI tools, there is a need for personnel who can directly train and design chatbots and algorithms.'
On the other hand, there are counterarguments that it is premature to justify layoffs on the basis of AI. Last year, Swedish fintech company Klarna reduced its workforce by 700, citing the introduction of an AI assistant, but later assessments indicated that not all tasks could be substituted by AI alone, prompting the company to resume hiring and shift its strategy this year. Commenting on this case, Gary Marcus, a professor emeritus at New York University and a critic of AI, referred to it as the 'Klarna Effect' in a Substack column on the 24th (local time) and pointed out that 'while AI layoffs may yield short-term expense savings, they pose a risk of weakening the talent pool and diminishing corporate competitiveness in the long term.'