Tech companies are always in the news, usually touting the next big thing. However, the tech news cycle recently hasnt been dominated by the latest gadget or innovation. Instead, layoffs are in the headlines.
In the last year, more than 70,000 people globally have been laid off by Big Tech companiesand that doesnt count 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 you?
Whats the damage?
Since the end of the pandemic hiring spree, large numbers of employees have been fired from major tech companies, including Alphabet (12,000 employees), 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, Robinhood, Snap, Coinbase and Spotifybut their layoffs are significantly less than those mentioned above.
Importantly, these figures dont include the downstream layoffs, such as advertising agencies laying off staff as ad spend reduces, or manufacturers downsizing as tech product orders shrinkor even potential layoffs yet to come.
And lets not forget the folks leaving voluntarily because they dont want to come into the office, hate their managers, or arent keen on Elon Musks hardcore work philosophy.
The effects of all of the above will be felt in the consulting, marketing, advertising, and manufacturing spaces as companies reduce spending and redirect it towards innovating in A.I.
So whats driving the layoffs?
The canary in the coal mine was reduced advertising spend and revenue. Many tech companies are funded through advertising. So, for as long as that income stream was healthy (which was especially the case in the years leading up to COVID), so was expenditure on staffing. As advertising revenue decreased last yearin part due to fears over a global recession triggered by the pandemicit was inevitable layoffs would follow.
Apple is one exception. It strongly resisted increasing its head count in recent years and as a result doesnt have to shrink staff numbers (although it hasnt been immune to staff losses due to work-from-home policy changes).
What does it mean for consumers?
Although the headlines can be startling, the layoffs wont actually mean a whole lot for consumers. Overall, work on tech products and services is still expanding.
Even Twitter, which many predicted would be dead by now, is looking to diversify its streams of revenue.
That said, some pet projects such as Mark Zuckerbergs Metaverse likely wont be further developed the way their leaders had initially hoped. The evidence for this is in the layoffs, which are concentrated (at least at Amazon, Microsoft, and Meta) in these big innovation gambles taken by senior leaders.
Over the past few years, low interest rates coupled with high COVID-related consumption gave leaders the confidence to invest in innovative products. Other than in A.I., that investment is now slowing, or is dead.
And what about the people who lost their jobs?
Layoffs can be devastating for the individuals affected. But who is affected in this case?
For the most part, the people losing their jobs are educated and highly employable professionals. They are being given severance packages and support which often exceed the minimum legal requirements. Amazon, for example, specifically indicated its losses would be in tech staff and those who support themnot in warehouses.
Having a Big Tech employer on their résumé will be a real advantage as these individuals move into a more competitive employment market, even if it doesnt look like it will be quite as heated as many had feared.
What does this mean for the industry?
With experienced tech professionals looking for work once again, salaries are likely to deflate and higher levels of experience and education will be required to secure employment. These corrections in the industry are potentially a sign its falling in line with other, more established parts of the market.
The recent layoffs are eye-catching, but they wont affect the overall economy much. In fact, even if Big Tech laid off 100,000 workers, it would still be a fraction of the tech work force.
The numbers reported may seem large, but theyre often not reported as a proportion of overall wage spend, or indeed overall staffing. For some tech companies they are just a fraction of the massive amount of new hires initially acquired during the pandemic.
Big Tech is still a big employer, and its big products will continue to impact many aspects of our lives.
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