Technology companies are always in the news, often signaling the next big thing. However, the tech news cycle hasn’t been dominated by the latest gadget or invention lately. Instead, layoffs are in the headlines.
Last year, more than 70,000 people were laid off by big tech companies worldwide—and that’s not counting the low-end effects of contractors (and other firms) losing business as budgets tighten.
What led to this massive earthquake? And what does it mean for the industry, and you?
What’s the harm?
After the pandemic ended hiring, layoffs from major tech companies included Alphabet (12,000 workers), Amazon (18,000), Meta (11,000), Twitter (4,000), Microsoft (10,000), and Salesforce (). 8,000)
Other household names share the spotlight, including Tesla, Netflix, Robin Hood, Snap, Coinbase, and Spotify — but their cuts are much smaller than those mentioned above.
Importantly, these figures do not include downstream cutbacks, such as ad agencies laying off staff when ad spending drops, or manufacturers downsizing when orders for tech products fall — or potential cuts.
And let’s not forget the people who leave because they don’t want to go to the office, hate their managers, or don’t have Elon Musk’s “hardcore work” philosophy.
Read more: Elon Musk’s ‘hardcore’ management style: A case study of what not to do
The knock-on effects of all of the above will be heard in consulting, marketing, advertising and manufacturing spaces as companies cut costs and shift to innovation in AI.
So what drives layoffs?
The canary in the coal mine has reduced advertising spend and revenue. Many technology companies are supported by advertising. So, as long as that revenue stream was healthy (especially in the pre-Covid years), so was the cost of staffing. As advertising revenue plummeted last year — partly due to fears of a global recession fueled by the pandemic — layoffs were inevitable.
Apple is an exception. It has strongly resisted increasing its headcount in recent years and has not had to cut staff numbers as a result (although it has not been immune to staff losses due to work-from-home policy changes).
What does it mean for consumers?
Although the headlines may be surprising, layoffs don’t make a whole lot of sense to consumers. In general, work on technology products and services is still expanding.
Even Twitter, which many predicted was dead, is looking to diversify its revenue streams.
Some pet projects, like Mark Zuckerberg’s Metaverse, may not turn out the way their leaders originally envisioned. The evidence for this is in the cutbacks in these big creative gambles (at least at Amazon, Microsoft and Meta) taken by senior leaders.
Low interest rates over the past few years coupled with high consumption related to Covid-19 have given leaders the confidence to invest in innovative products. Outside of AI, that investment is now declining or dead.
And what about the people who were laid off?
Layoffs can be difficult for those affected. But who gets hurt in this case?
Most of the people who lose their jobs are educated and highly employed professionals. They are being offered severance packages and support that exceed the minimum legal requirements. Amazon, for example, pointed out that its losses will be on technology workers and those who support them; Not in the warehouse.
Having a Big Tech recruiter on their CV will be a real advantage when these individuals enter the competitive job market, even if it doesn’t seem as hot as many fear.
What does this mean for the industry?
When experienced technologists are looking for a job again, wages can be lower and more work experience and education is required. These corrections in the industry may be a sign that they are falling in line with other, more established market segments.
The recent strikes are attention-grabbing, but they don’t affect the overall economy much. In fact, while Big Tech has laid off 100,000 workers, it’s only a fraction of the tech workforce.
The reported numbers may seem large, but they are usually not reported as total salary costs or total workforce size. For some tech companies, it’s just some of the massive new hires that have come in the wake of the pandemic.
Big Tech is still a big employer, and its big products continue to influence many aspects of our lives.