Job Market Update: Preparing for Future Layoffs in Tech Sector
Back when the pandemic hit and the rest of the world went south, the tech industry was still relatively doing better. However, since 2022, things have not been so fortunate for this industry due to the impending recession. As a result, the employment market experienced a slowdown and has not recovered since.
In fact, the massive layoffs in the tech industry in 2023 alone seem nothing less than devastating when looked at just from a numbers perspective. Twenty-five thousand jobs were lost in the initial week of January due to layoffs made by Amazon, Vimeo, and Salesforce. Google has reduced the number of employees by 12,000 of its permanent employees. The same pattern was followed by companies like Microsoft and PayPal.
Certain companies have made virtual layoffs commonplace by alerting hundreds of uninformed workers on a call via Zoom that their financial future is in jeopardy rather than in a personal chat, which only exacerbates an already awful situation. But why is all this happening, and what does the future hold for the tech industry? We will analyze all those questions in this article. So, keep on reading.
Layoffs In The Tech Sector: Putting It In Perspective
The massive layoffs are quite scary, and employees of many years are being let go around the country with no solid plan for what’s to come. Despite the alarming number of employees affected by employment reductions, the tech sector’s future is still apparent. The layoffs scarcely put a difference in the hiring boom that came before them. Despite a $600 million reorganization plan that resulted in 5% of Cisco’s staff being eliminated, the business says it would have more people by the end of the year than it had during the beginning of the year.
Surprisingly, even though the layoffs are taking place, many employees are also joining the workforce balancing out the net result. For instance, Google added 36,751 employees while letting go of 12,000 prior Google employees, making the net result 24,751. Similarly, Meta added 19,100 employees while it let go of 11,000 employees, making the net result 8,100 employees, as per Kadima Careers.
However, this raises the question of why the layoffs are happening in the first place. Numerous economists anticipate that there will be a global recession in 2023 and that international affairs will continue to have a bearing on the global economy. They also believe the situation will only get more severe due to the continuing Russian offensive in Ukraine, which will have significant consequences for the US and Europe. Before this, the World Bank and IMF had warned economies to prepare for an economic downturn. As a result, IT firms are reviewing their expenditures and preparing for a potential recession despite broad concern over the world’s economic decline.
However, let’s go into it in more detail and see why it may be happening.
Layoffs In The Tech Sector: Reasons Behind The Decisions
Layoffs are fundamentally about reducing expenses. All businesses incur expenses, whether for the real estate they occupy, the supplies they require to produce their goods, or the expense of compensating their staff. A business can raise earnings and keep a higher income when such costs are reduced.
A layoff notice might indicate to shareholders that leaders are prepared to make uncomfortable decisions to decrease expenses and assist the firm in remaining lucrative in an uncertain financial situation like the one we currently find ourselves in.
As mentioned, the tech industry was much more fortunate than other sectors during the pandemic. While the rest of the world became clueless, Big Tech experienced unheard profits, especially due to the undeniable demand for everything digital. E-commerce platforms, remote work tools, and streaming platforms: all digital products certainly experienced a boom, and for a minute, the future looked the most bright. To keep up with the demand, they needed to hire more than just cheap employees on contract but instead had to go for high-quality employees.
However, once 2022 went away, the tech industry had to deal with the post-pandemic effects, and people simply did not have the same level of interest in digital products. Naturally, the costs started to become more than they could afford. On top of that, investors have also pushed for a more extreme cost-cutting plan since there were too many workers in the present environment, and the cost per person was far too high.
For instance, when it comes to Twitter, the drama revolving around Elon Musk was a major factor in the layoffs. The company let go of employees from different departments; many former employees have even filed lawsuits. Another reason for the layoffs is advertisers backing out due to security concerns. 90% of the platform’s revenue came from advertisements, and with this department being hit, too, the layoffs became inevitable.
Similarly, Meta Platforms also had to go for layoffs because they overhired during the pandemic by overestimating the demand. This is a common issue, and Zuckerberg has even said that this was a mistake on his part. Amazon faced the same fate, especially since the platform failed to monetize hardware. Another company that followed the same pattern was Vimeo.
However, how can companies come out of this? Concentrating on R&D may be feasible to recover consumer confidence and re-enter people’s lives like these companies did during the pandemic. These businesses will gain prominence once again if they innovate and invest in cutting-edge technologies such as accessible IoT, Web 3, or many others that are still in their infancy or might not exist at all yet.
When companies focus on research and development, they will be able to generate ideas and products that might have the potential to improve people’s lives all over the world significantly. To make the sector more “future-ready,” businesses must reskill and upskill their staff employees. That is because changes are always taking place in the tech sector. If the employees do not have the necessary skills for the upcoming developments, layoffs like this will also continue. But of course, the companies must also be innovation-driven and client-focused because it’s difficult to survive in this market without those strategies.
Layoffs In The Tech Sector: What Does The Future Hold?
From the employees’ perspective, the layoffs offer both a positive and negative opportunity. It is a negative opportunity since laid-off employees naturally need help competing in the sector. Their employment history usually becomes questionable, and the same sector often hesitates to hire the same employees.
That being said, laid-off employees usually have a better time finding jobs in other sectors. It is important to note that the tech industry is not the only industry that has announced layoffs over the past two years. The energy, retail, banking, and healthcare sectors have done the same. However, these sectors are now hiring talent trained in machine learning, AI, and other technical skills to make businesses smoother. Companies such as Home Depot, Target, and Nike are implementing digital transformations, and as a result, they are after IT professionals.
What about the tech industry, though? How are they progressing with their hiring processes now, especially after the layoffs were announced? The tech sector is now focusing on hiring part-time employees or contract employees instead of full-time workers. The sector is simply trying to stay afloat, avoiding spending more than it can afford right now. In a way, this benefits IT professionals since they can gain experience in the sector for some time and then move on to better opportunities as their career progresses. IT skills are in high demand across the majority of industries.
Layoffs are never good news, but sometimes they are necessary, especially when challenging times occur. It is difficult to predict whether massive layoffs, such as the one taking place right now, will happen in the future or not. Either way, the tech industry’s future doesn’t appear too bleak.
Furthermore, no employment position is secure when we think about it. In fact, concerning the tech industry, the employee tenure is only three years. The stigma around job-hopping has also died down, especially since layoffs became commonplace. Therefore, professionals should always update their skills and look for opportunities.
Vice President, İntelligent Design & Consultancy Ltd
Over 12 years of global & rich experience in Portfolio & Program Delivery Management in leading & managing IT Governance, PMO, IT Portfolio/Program, IT Products, IT service delivery management, Budget Management, and more.