There was supposed to be an increase in employment, but there are group layoffs. The company explains this by “adapting to realities”

In September, the authorities of Łódź solemnly welcomed a new employer – Alorica Inc., which operates in the business support sector (call center, chats, responding to customer e-mails). – With the launch of the new location, Alorica plans to employ hundreds of residents of the region to work both on-site and remotely – emphasizes Matt Sims, the company’s representative.

1,000 people were to be employed

The vice-president of the city, who was present at the company’s inauguration, also spoke about the planned increase in employment. A year has passed and instead of the announced thousand positions, there are group layoffs. They will cover 56 people.

The company explains the need to cut jobs as “adapting to changing needs.” Its representative, quoted by Gazeta Wyborcza in Łódź, assured that he would not leave employees to their own devices and would offer them “internal relocation” if possible.

He also stated that Alorica is not ending its operations in Poland, but is “committed to strengthening our position in Poland and continuing to provide high-quality services to our clients as we look to the future.”

The middle income trap

Prof. was asked to comment on the information that not only did the company not achieve the announced employment, but also began to slow down. Piotr Krajewski, director of the Institute of Economics of the University of Łódź. He began his explanation by saying that “Poland is becoming a highly developed country, which means higher labor costs.”

– This may mean that shared services centers will no longer be competitive and will be moved, for example, to Asian countries where labor costs are lower and employees are as good as us in terms of education and knowledge of English. In the case of more specialized services, Poland may fall into the middle-income trap, he said.

The journalist of Gazeta Wyborcza explained that the middle-income trap occurs when moderately developed countries reach the income level of developed countries through lower labor costs, copying technical solutions from more developed countries and offer a high return on investment. When labor costs start to rise, production slows down and companies start looking for places where it is cheaper to do business.

Krakow has become too expensive

The move to cheaper countries is visible in the outsourcing sector of relatively simple office services – call center, data processing. Several years ago, many companies were established in Poland providing such services to customers abroad. A British or Dutch company was financially better off outsourcing call center operations to a branch in Poland than to its own branch, because it paid employees in Poland several times less. It is not without reason that companies in the BPO sector were established in large cities: they employed students and young graduates, for whom they were often the first employer. Everything was working fine until there was a shortage of people willing to work and their financial expectations went up.

The balance of profits and losses often resulted in the transfer of process services to Romania or Bulgaria (Ukraine was becoming a popular destination before 2022). This “optimization” hit Krakow very hard, where many such companies were established at one time. Here we write more about layoffs on the Krakow market.

In turn, in the text below we try to explain whether something disturbing is happening on the labor market or whether we should treat group layoffs announced by various companies as the normal order of things.