The tech industry has seen a string of layoffs amid the global economic crisis. Globally, large tech companies such as Meta, Amazon, Microsoft, Netflix, and others are cutting jobs, causing tensions among employees. These companies have been announcing layoffs every week. In fact, as of mid-November, more than 73,000 workers in the US tech sector had been laid off by the big tech giants. The year has seen major job cuts across all industries; they were initially in small numbers in the beginning, but the numbers are increasing as we reach the end of the year. Overall, it is affecting every group of people out there, like employees, companies, investors, and other stakeholders.
What does the data say about the layoffs?
Amazon fired around 10,000 of their employees in corporate and technology jobs, which is around 3% of their total employee base, and CEO Jeff Bezos even said that the layoffs will continue until 2023. Earlier in the month of November, the company announced a freeze on hiring. These cuts will place more focus on Amazon’s devices’ decisions, including Alexa and other retail and human resources divisions. Meta, for instance, laid off 11,000 employees, which is around 13% of their total staff.
The reason that was stated by Mark Zuckerberg was a decrease in e-commerce, the wider economic downturn, and a decline in ad sales over the past few months. The billionaire, Elon Musk, CEO of Tesla and SpaceX, who purchased Twitter, wasted no time in laying off 50% of Twitter’s staff, including former CEO Parag Aggarwal, the CFO, and the top lawyer. Fewer than 1000 people were laid off at Microsoft, which was followed by other tech companies like Salesforce, Zillo, a real estate marketplace, which laid off 300 employees, which is 25% of its workforce, Snapchat, which laid off around 1200 employees, and Robinhood, a brokerage app, which laid off around 23% of its workforce. Even Google is expected to cut around 10,000 jobs in the coming days.
Why are there so many layoffs in these tech companies?
I. The pandemic –
During the pandemic, when we locked ourselves in our houses, we shifted to a complete online mode. Many office-going workers were working from home with their laptops. The schools and other teaching centers shifted to a completely online space. Shopping, entertainment, and other activities moved online. This implied that there was a need for more techies during this spree. For example, if a company or app requires 20 employees to function properly, the companies actually hired 25 or more employees, not because the workload was heavier, but only in case any key employees left.
II. Post-Pandemic implications:
Since things post-pandemic have been moving to a physical space, there has been a decline in the manpower in these tech companies, and the consumption pattern of the general public in the online space has declined. Some of the resources were hired at a higher cost due to a sudden upsurge in demand.
III. Economic situations and the threat of recession globally
The issue arises in these firms’ growth prospects. The revenues of these companies have fallen in previous months, as have their profits. These decline in profits over the last few months imply an increase in operational and variable costs borne by the company as a result of a large number of employees, and thus employee costs being the variable costs are the first to be slashed. Rising inflation has impacted several world economies severely, leading to a job crisis in the market. It is predicted that we are moving towards a global recession. In such cases, a recession means less consumer spending and, most importantly, fewer tech firms. Meta, for instance, quoted that they have been suffering losses in previous months because of increasing competition with TikTok and a new iOS update. Also, there has been a decrease in revenue when it comes to flashing digital ads, which is leading to their market shrinkage.
IV. Russia-Ukraine War
The Russia-Ukraine war has made the markets more volatile, and hence the demand for goods and services has plunged over the course of the conflict. It has also created an energy crisis in the whole of Europe, and thus there has been an increase in the cost of living.
The Reaction of Investors the entrepreneurs:
The reaction has been different for different people and different companies. For big companies, payroll does not matter much; instead, their survival and profits do. If we take an early-stage company or a startup, for instance, and they fire their employees, it means they are in great trouble. In a nutshell, investing in tech companies is becoming riskier than before. It is really difficult to predict which company will grow and which will fall. Some entrepreneurs and investors are also of the opinion that instead of announcing a mass set of layoffs, the companies can even go for pay cuts for employees.
Written by Irfan Ali
Edited by Yashvi Vasani
