Tech companies are always in the news, usually touting the next big thing. However, the recent tech news cycle hasn’t been dominated by the latest gadget or innovation. Instead, layoffs grabbed the headlines.
Globally, more than 70,000 people were laid off by big tech companies last year — and that doesn’t include the downstream impact of contractors (and other organizations) losing business to tighter budgets.
What exactly caused this massive reshuffle? What does this mean for the industry and you? How much does it hurt? Since the end of the pandemic, large tech companies have laid off large numbers of workers, including Alphabet (12,000 employees), Amazon (18,000), Meta (11,000), Twitter (4,000), Microsoft (10,000) and Salesforce (8,000 ).
Other household names are also in the spotlight, including Tesla, Netflix, Robinhood, Snap, Coinbase and Spotify — but their layoffs are significantly smaller than the ones above.
Importantly, these figures do not include downstream layoffs, such as at ad agencies due to lower ad spending, or at manufacturers due to lower orders for tech products — and that’s not even a potential layoff.
And let’s not forget those who voluntarily left because they didn’t want to come into the office, hated their manager, or weren’t keen on Elon Musk’s “hardcore work” philosophy.
Consulting, marketing, advertising, and manufacturing will feel the knock-on effects of all of the above as companies reduce spending and redirect it toward AI innovation.
So what is driving the layoffs? The canary in the coal mine has reduced ad spend and revenue. Many tech companies get their money through advertising. So, as long as revenue streams are healthy (especially in the pre-COVID years), so are staffing expenses. With ad revenue falling last year — in part because of fears of a global recession triggered by the pandemic — the inevitable layoffs followed.
Apple is an exception. It has strongly opposed increasing headcount in recent years so it doesn’t have to shrink its workforce (although it hasn’t been immune to employee turnover due to work-from-home policy changes).
What does this mean for consumers? As startling as the headlines might be, the layoffs actually mean little to consumers. Overall, jobs in tech products and services are still expanding.
Even Twitter, which many predicted was now dead, is looking to diversify its revenue streams.
That said, some pet projects such as Mark Zuckerberg’s Metaverse may not get as far as their leaders initially hoped. Evidence of this is in the layoffs, which are largely centered around (at least at Amazon, Microsoft, and Meta) these big innovation gambles made by senior leaders.
Over the past few years, low interest rates combined with high COVID-related spending have given leaders the confidence to invest in innovative products. Investment is now slowing, or dead, except in AI.
What about those who lost their jobs? Layoffs can be devastating to the individuals affected. But who is affected in this case? In most cases, those who lost their jobs were educated and employable professionals. The severance pay and support they receive often exceeds the minimum legal requirements. Amazon, for example, has made it clear that its losses will be in the technicians and the people who support them; not in the warehouses.
As these folks enter a more competitive job market, even if it doesn’t look as cut-throat as many fear, having a big tech employer on their resume will be a real advantage.
What does this mean for the industry? Salaries are likely to drop as experienced tech professionals look for work again, and higher levels of experience and education are required to secure employment. These adjustments in the industry may indicate that it is aligning itself with other, more mature segments of the market.
The recent layoffs are high-profile, but won’t have a big impact on the overall economy. In fact, even if Big Tech lays off 100,000 employees, it’s still only a fraction of the tech workforce.
The reported numbers may appear large, but they are often not reported as a percentage of overall payroll expenses, or indeed as overall staffing. For some tech companies, they’re just a fraction of the initial flood of new hires they’ve acquired during the pandemic.
Big Tech is still a big employer, and its big products will continue to impact many aspects of our lives.