In the wake of the COVID-19 pandemic, the tech industry has seen a surge in layoffs.
Many companies have been forced to downsize in an effort to cut costs and stay afloat amid the economic downturn. This has left thousands of skilled workers without jobs, many of whom are now struggling to find new employment in a highly competitive job market.
Layoffs have not only affected the employees who have lost their jobs but the broader tech industry as a whole. With so many skilled workers now unemployed, the job market has become highly competitive, making it difficult for those who have been laid off to find new employment.
The industry is confronting one of its worst contractions in history with Meta, Google, Microsoft and Amazon all announcing mass layoffs over the span of a few months. According to a tech job tracker, there have been more than 200,000 tech jobs lost since the start of last year.
The tech industry has endured major downturns in the past, including the dot-com crash of the early 2000s and the Great Recession, it has historically been a resilient industry, thanks to its size and ubiquity.
Margaret O’Mara, a Silicon Valley historian at the University of Washington, said that the tech industry has always been growth-oriented, from the early days of microchip production in Silicon Valley more than 50 years ago. Despite this, the recent layoffs by big tech companies such as Meta, Amazon, Microsoft and Google are still historic, having eliminated at least 51,000 jobs in recent weeks.
“Analysts had been saying that Silicon Valley’s growth couldn’t go on forever,” said Carolina Milanesi, a consumer tech analyst for the research firm Creative Strategies. “But still, the extent of the cuts are surprising many now.”
The cuts followed a period of rapid growth, with Amazon and Meta doubling their headcount during the pandemic, while Microsoft and Google increased their workforce by more than 50% during an industry-wide hiring spree. In contrast, Apple grew at a slower pace than its Big Tech counterparts, increasing its workforce by around 20% during the pandemic and the company is the only Big Tech company that has not announced layoffs.
Some of the world’s most valuable tech firms have announced layoffs.
Microsoft attempted to buy Activision Blizzard for $69 billion last year, and it generated more than $16 billion in profits during the three months that ended in December according to the most recent earnings report.
Meta reported a 52% profit drop in its last quarter, but still made $4.4 billion.
Despite the decline in profit during its most recent quarter, Amazon still earned nearly $3 billion.
These companies are preparing for what may come, expecting some of their clients to pull back on spending.
According to Sam Abuelsamid, an analyst at Guidehouse Insights, they are sending a message to their shareholders at a time when tech firms are seeing a decline in stock prices. They want to be prudent, get back on a growth path and avoid needless spending, Abuelsamid said.
Meta was the first to announce a significant number of layoffs, and CEO Mark Zuckerberg’s justification for the layoffs established a precedent for other tech companies to follow. The rationale given for the layoffs included pandemic-related recruiting, macroeconomic conditions such as high inflation and concerns about a recession.
“Our revenue has been much lower than I expected due to the macroeconomic downturn, increased competition, and ads signal loss caused by overzealous recruiting,” Zuckerberg said in a message to Meta employees. “I take responsibility for this mistake.”
Although inflation is beginning to moderate, dropping 9% to 6.5% recently, it is still higher than normal. Some economists predict a recession in the United States this year. This has led executives of major tech companies to fear that their customers will continue to reduce spending, which could exacerbate the economic downturn.
Analyst Milanesi said that companies need to focus on maintaining research and development initiatives rather than cutting employees, and they should also be mindful of opportunities to acquire or invest in emerging technologies that could disrupt their businesses.
“At the end of the day, people are, to some extent, dispensable, whereas you cannot cut in your R&D,” Milanesi said, according to NPR, referring to research and development. “And they need to keep an eye on making acquisitions, on the next big thing that can come and disrupt their business.”
The recent wave of tech layoffs presents a significant challenge for the industry and the job market at large. However, there may be potential long-term benefits, as the pandemic has accelerated the adoption of digital technology in various areas. As the industry continues to adjust to these changes, there will likely be a shift in the types of jobs available and the skills that are in demand.
Big Tech’s vast balance sheets and hundreds of thousands of employees make it capable of weathering most economic shocks, making it a bellwether for decisions on corporate spending, hiring, and other matters in many other industries.
Demand for those workers’ skills goes beyond Big Tech firms and traditional startups, which helps those who are laid off move on to new opportunities, said Milanesi with the research firm Creative Strategies.
“Every company is in some sense a technology company right now,” Milanesi said according to NPR. “And for coders, engineers and AI experts and data experts, these people can find a place in so many other industries.”