What’s with all the big tech layoffs?

With the exception of Apple, all the Big Tech companies have announced thousands upon thousands of layoffs over recent months. Also, as has been reported by The Verge, the statements these companies have put out about why they’ve laid off so many workers all seem pretty similar.

They focus on difficult times during COVID-19 sparking a digital boom that caused an acceleration in hiring practices. As things have slowed down a little, however, they can’t maintain their workforces at levels they previously thought would be sustainable. With so many people losing their jobs, however, and so little relatable information coming across through all the multiple statements being put out by the companies that are cutting them, we thought it would be worth looking into it all to try and understand what is going on.

An overview of the tech layoffs

The tech sector is experiencing downsizing and layoffs, with over 120,000 tech workers losing their jobs in 2022, which is much more jobs than were lost during the bust of the .com boom at the turn of the millennium. As you can see above, these layoffs have been affecting some of the biggest companies in tech including Microsoft, Meta, Twitter, Spotify, Amazon, and more.

There are global factors to take into account here such as the ongoing economic turmoil caused by macroeconomic factors such as rising inflation, a slowdown in consumer spending in a broader context of contracting economies, and the ongoing war in Ukraine. This has seen tech companies tightening their belts over the last twelve months with economic forecasts indicating that things are unlikely to get better any time soon. The current situation is a result of economic cycles and companies seeking to balance their books for this year so that they can start the next financial year in a stronger situation.

This is a really good chart via @YahooFinance.

The recent tech layoffs in context: pic.twitter.com/Uaf6x7YZC5

— fed_speak (@fed_speak) January 28, 2023

 

Why now?

The idea behind layoffs is that they save companies money in the long run, even though there’s an initial expenditure of millions or even billions of dollars to pay in severance. Once you get past the severance liabilities then, this can make sense with fewer salaries to pay. Interestingly, however, there are economists who say that layoffs do not actually help companies save money as they ignore the real problem, which is revenue.

The equation goes that revenue is down so we will have to cut costs to maintain profits. However, this overlooks the fact that revenue is down. The fact that all the big tech statements are the same tells us that they are trying to see this as something that they can’t control in a context where profits simply have to be maintained. When you cut your workforce, however, you may just be cutting the main asset you have to help you raise long-term revenues moving forward. In short, laying off staff is the quickest and easiest route out of lowered growth forecasts but it isn’t necessarily the best one for companies to take.

Even though these companies have tens of billions, often hundreds of billions of dollars, collectively, in reserves, they supposedly don’t have enough money to support their workforces without hurting profits, which means workers have to go. It is the profits that must come first at all costs, even if is global factors that have nothing to do with them that are causing the dips in revenue.

The human costs of layoffs like these

Unfortunately, the system that dictates all of this fails to take into account the real effects this type of abstract number crunching has on real people and real families. Losing your job is a horrible thing to go through, not least because of the financial strain it places upon you and your family, but also the emotional and psychological turmoil you face when you are cast aside by your employer. Even without the fact you are now scrambling around thinking about how you are going to pay your bills, which have just gone up considerably because of the same global factors that are behind your job loss in the first place, you are also having to deal with feelings of worthlessness, shame, and maybe even misplaced guilt.

The only good news in all of this is that digital boom that led many of the affected big tech companies to take on more workers than they now believe they can handle, is still continuing at pace. The broader tech sector is actually in a strong position with technology and digital technology seeping into more aspects of our daily lives. It is big tech that has been hurting the most while the broader tech sector is still hiring at record numbers. In an increasingly globalized labor market that offers more and more remote working opportunities, there is a good chance that many of the tech workers who have lost their jobs over recent months will be able to find something else.

Conclusion

In conclusion, the recent layoffs made by tech companies have been affected by the way investors evaluate companies and the economic cycles even though layoffs may not be an effective way of improving profitability in the long term and will have significant negative impacts on employees. The broader tech sector is in a strong position, however, with the big tech companies being more vulnerable to broader economic factors. With the human cost of layoffs like this being so significant, however, a question worth asking is, would you boycott any of these companies based on their hiring and firing practices?

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