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 past year, more than 70,000 people have been laid off globally by Big Tech companies — and that’s 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 technology 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, Robin Hood, Snap, Coinbase, and Spotify, but their layoffs are significantly less than those listed above.
Importantly, these numbers don’t account for downstream layoffs, such as ad agencies laying off staff as ad spend declines, or manufacturers downsizing as orders for tech products decline — or even potential layoffs yet to come.
And let’s not forget the people who voluntarily leave because they don’t want to come to the office, hate their managers or aren’t thrilled with Elon Musk’s “hardcore work” philosophy.
The knock-on effects of all of the above will be felt in the consulting, marketing, advertising and manufacturing spaces as companies reduce spending and redirect it 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. As ad revenue fell last year – in part due to fears of a global recession triggered by the pandemic – layoffs were inevitable.
Apple is an exception. It has strongly resisted increasing headcount in recent years and is therefore not required to reduce headcount (although it has not been immune to staff losses due to changes in work-from-home policies).
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, which many predicted would be dead now, is trying to diversify its revenue streams.
That said, some fan-favorite projects, like Mark Zuckerberg’s Metaverse, probably won’t develop as their leaders 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 receive severance pay and support that often go beyond the minimum legal requirements. For example, Amazon specifically stated that its losses would be with technical staff and those who support them; not in warehouses.
Having a Big Tech employer on their CV will be a real advantage as these individuals move into a more competitive job market, even if it doesn’t look like it will be as heated as many had feared.
What does this mean for the industry?
With experienced tech professionals looking for work again, salaries are likely to drop and higher levels of experience and education will be required to secure employment. These corrections in the industry may be a sign that it is moving in line with other 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 just 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.
Nathalie Collins, senior lecturer, Edith Cowan University; Jeff Volkheimer, Senior Director, Collaboration and Continuity Technologies, Duke Health, duke universityand Paul Haskell-Dowland, Professor of Cyber Security Practice, Edith Cowan University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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