Tech Sector Lays Off Over 200,000 Workers

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Exponential growth and capitalization on the latest demands have been the norm in the tech sector for the past decade. When the COVID-19 pandemic hit and substantially increased the amount of people working from home, major tech companies like Amazon and Meta all launched extensive hiring campaigns, doubling their employees in a matter of months to keep up with the new demand. However, following late 2022, the tech sector announced mass layoffs, with more than 200,000 tech jobs lost over the past year. 

To break down the numbers, Fortune Magazine reports that the 200,000 tech jobs lost include 18,000 from Amazon, 12,000 from Alphabet, 11,000 from Meta, 10,000 from Microsoft, 8,000 from Salesforce, 4,000 from Twitter, and more from Tesla, Netflix, Robinhood, Snap, Coinbase, and Spotify. It is also important to realize that these figures do not even include downstream layoffs from industries like manufacturing or advertisement that are impacted by the tech sector’s layoffs. 

In November 2022, Meta was the first major tech company to announce substantial layoffs– around 13 per cent of their workforce. “I want to take accountability for these decisions and for how we got here,” stated Meta CEO Mark Zuckerberg in early November on the Meta website. “I know this is tough for everyone, and I’m especially sorry to those impacted.”

Zuckerberg was referring to his decision to rapidly increase the size of his team at the beginning of the COVID-19 pandemic. He recalled that there was an “outsized revenue growth” due to a “surge in e-commerce,” and predicted that there would be a “permanent acceleration that would continue even after the pandemic ended.” Recent reports of Meta’s revenue, however, have shown a downturn in profits due to both a reduction in e-commerce and rising interest rates in response to inflation.

Following Meta’s announcement, many other major tech companies followed suit. Amazon initiated its first round of layoffs in November, announcing that 10,000 workers could be cut because of an “unusual and uncertain macroeconomic environment.” And in early January, Amazon CEO Andy Jassy wrote, “Today, I wanted to share the outcome of these further reviews… we plan to eliminate just over 18,000 roles”. 

Alphabet CEO Sundar Pichai stated a similar reason on Google’s website that “Over the past few years [they’ve] seen periods of dramatic growth, and to match and fuel that growth, [they] hired for a different economic reality than the one we face today.” 

Spotify’s CEO Daniel Ek released a statement on the Spotify website saying that “efficiency takes on greater importance,” in a "challenging economic environment", and admitted that he was “too ambitious in investing ahead."

Each of the major tech companies have given extraordinarily similar reasoning for their layoffs, blaming the post-pandemic era, mistakes in overhiring, and high inflation rates. While these factors certainly played a substantial part in their decision, many experts suspect that there are other unspoken reasons as none of them are remotely near bankruptcy. 

One theory is that these tech layoffs have more to do with investors rethinking their investment evaluations than companies’ bottom lines. Michael Cusumano, the associate dean of MIT’s Sloan School of Management, said to Forbes Magazine that when sales are increasing 20 to 30 per cent annually, nobody cares about profits, but as we are not in a growth phase, investors are more cautious. 

Another theory is that in a time where a potential recession threatens the profits of the tech industry, companies are given the choice between either selling more products and raising prices, or reducing its expenses and laying off workers– the option that many major tech companies have gone with, as reported by Fortune Magazine.

Some also argue that the mass layoffs are not simply an unavoidable consequence of the changing economy, but rather because CEOs too are human, navigating this time of uncertainty by copying others. Business professor Jeffrey Pfeffer put it this way to Stanford News: “Was there a bubble in valuations? Absolutely. Did Meta overhire? Probably. But is that why they are laying people off? Of course not […] These companies are all making money. They are doing it because other companies are doing it.”

At first, the mass layoffs in the tech sector seems worrying; the technology sector contributes $1.9 trillion USD to the $24 trillion USD GDP, according to the US International Trade Administration. However, the layoffs are not a sign of a regression, rather, as mentioned above, a response to the surplus of hiring that occurred within many major tech companies in the beginning of the pandemic. 

An analysis of data from the US Bureau of Labor Statistics published by the Computing Technology Industry Association showed that, as of March 2022, there were 8.9 million jobs supported by the tech sector. With 8.9 million American jobs in the tech sector and over 158 million American jobs as of the beginning of 2023 according to Statistica, the 200,000 layoffs only reflect a reduction in just over two per cent of the jobs in the American tech sector, and just over 0.12 per cent of total American jobs. 

Although layoffs are often quite devastating to the recipient, due to the widespread applications of tech in other industries, workers can typically find another job quickly. According to a study conducted in October 2022 by ZipRecruiter, 95 per cent of tech workers find another job within six months of being laid off. 

23-year-old Wen Huber, a videographer laid off in late July by a tech startup, reported to the Wall Street Journal that he was “surprised at how quickly [he] was able to secure an offer for a job,” despite the “influx of competition with a lot of people also being laid off.” 

The success of laid off tech workers in finding another job, according to Julia Pollak, chief economist at ZipRecruiter, can be attributed to tech workers being "the most sought-after workers with the most in-demand skills." Paired with the record amount of job openings in early 2022, most workers had no problem finding another job in either the tech industry, or other industries. 

Major tech companies are also giving out severance packages to those included in the mass layoffs. Meta and Microsoft, for example, are both paying 16 weeks worth of base salary, providing family health insurance for six months, and more.