Technology companies are always in the news, usually touting the next big thing. Lately, however, the tech news cycle hasn’t been dominated by the latest gadget or innovation. Instead, layoffs are in the headlines.
In the last yearmore than 70,000 people have been laid off globally by Big Tech companies – not counting the downstream effect of contractors (and other organizations) losing business as budgets tighten.
What exactly led to this massive shakeout? And what does it mean for the industry and for you?
What’s the damage?
Since the end of the pandemic, large numbers of workers have been laid off at major tech companies, including Alphabet (12,000 employees), Amazon (18,000), meta (11,000), Twitter (4,000), Microsoft (10,000) and Sales team (8,000).
Other household names share the spotlight, including Tesla, Netflix, Robin Hood, Snap, Coinbase, and Spotify, but their layoffs are significantly less than those listed above.
Importantly, these figures do not take into account the downstream layoffs, such as ad agencies laying off staff as advertising spend declines, or manufacturers downsizing as orders for tech products decline — or even potential layoffs are yet to come.
In January 2023, more tech workers were laid off than in any month since the start of the pandemic:
– Jan. 2023: 54,224 (and counting)
– Nov 2022: 52,135
– April 2020: 26,710
– May 2020: 25,804
More than: https://t.co/Ch0Ni3lBX7
— Roger Lee (@roger_lee) January 20, 2023
The knock-on effects of all of the above will be felt in the consulting, marketing, advertising and manufacturing spaces as companies reduce and refocus their spending to innovation in AI.
So what’s driving the layoffs?
The canary in the coal mine reduced advertising spending and revenue. Many technology companies are funded through advertising. So as long as that revenue stream was healthy (which was especially the case in the years leading up to COVID), so was staff spending. Because advertising revenue fell last year – partly because of it fear of a global recession caused by the pandemic – layoffs were inevitable.
Apple is an exception. It strongly opposed raising its main count in recent years and as a result has not had to reduce headcount (although it has not been immune to headcount losses due to changes in work from home policy).
What does it mean for consumers?
While the headlines may be startling, the layoffs won’t actually mean much to consumers. In general, the work on technical products and services is still expanding.
even twitter, many of whom predicted that they would now be deadis searching for diversify it streams of income.
That said, some pet projects like Mark Zuckerberg’s Metavers will probably not develop further as their leaders had initially hoped. Evidence for this can be found in the layoffs, which are concentrated (at least at Amazon, Microsoft and Meta) in these big innovation gambles being taken by senior leaders.
In recent years, low interest rates combined with high COVID-related consumption gave leaders the confidence to invest in innovative products. Unlike in AI, that investment is now slowing down, or dead.
And what about the people who lost their jobs?
Layoffs can be devastating for those affected. But who is affected in this case?
For the most part, the people who lose their jobs are well-educated and highly employable professionals. They are given severance pay and support which often exceed the minimum legal requirements. Amazon, for example, specifically stated that it losses would be in technical personnel and those who support them; not in warehouses.
Having a Big Tech employer on their resume will be a real advantage as these individuals move into a more competitive job market, even if it doesn’t look like it just as heated as many had feared.
Interesting data that puts some major tech layoffs into perspective. 🧐 pic.twitter.com/9toJ5Dk9yD
— Wall Street Silver (@WallStreetSilv) January 23, 2023
What does this mean for the industry?
As senior tech professionals look for work again, salaries are likely to fall and so will higher levels of experience and education needed to secure a job. These corrections in the industry may be a sign that it’s falling in line with others, more established parts of the market.
The recent layoffs are glaring, but they won’t have much of an impact on the overall economy. Even if Big Tech laid off 100,000 workers, that would still be a fraction of the tech workforce.
The numbers reported may seem large, but they are often not reported as a percentage of total payroll expenditure, or even total headcount. For some tech companies, they are only a fraction of the massive number of new hires initially hired during the pandemic.
Big Tech is still a big employer and its big products will continue to impact many aspects of our lives.
- Natalie CollinsSenior lecturer, Edith Cowan University; Jeff VolkheimerSenior Director, Collaboration and Continuity Technologies, Duke Health, duke universityand Paul Haskell-Dowlandprofessor of cybersecurity practice, Edith Cowan University