In recent months, tech companies have laid off thousands of employees. At some of the biggest names in technology, including Meta, Amazon, Netflix, and eventually Google, as well as smaller companies and start-ups, over 120,000 employees are estimated to have lost their jobs in 2022 alone. Announcements about cuts are still being made during early 2023 and are expected to continue according to the New York Times.
So, what is behind the mass exodus of so many tech employees? According to Dr. Mark Robinson, one reason is similar to what happens in the airline industry when one airline lowers its ticket prices followed by similar actions by competing airlines. None of these companies wants to be left out of a potential surge in consumer demand so they will also cut their ticket prices in return. In terms of the recent numbers of layoffs, once a group of well-known companies announces layoffs, it’s often a sure bet that other companies will follow the same strategy to cut their costs.
Another reason we’re seeing more tech layoffs is the fact that many companies simply over-hired during the COVID-19 pandemic, perhaps thinking that customer demand would soon recover. As more companies closed stores and laid off employees, picking up talent on the cheap was the strategy that many companies relied on.
Perhaps the main reason we’ve seen layoffs recently is the belief that the U.S. economy is headed into a recession. Layoffs come as digital advertisers are cutting back on spending and rising inflation curbs consumer spending according to a recent report from CNBC.
Will Layoffs Continue in 2023?
According to many economists and other industry commentators, it appears that layoffs will continue during the next six months according to the Wall Street Journal. It was recently reported that DOW, IBM, and SAP would also layoff some of their staff. “We are taking these actions to further optimize our cost structure,” Jim Fitterling, Dow’s chief executive, said in announcing the cuts, noting the company was navigating “macro uncertainties and challenging energy markets, particularly in Europe.”
Recently, four companies trimmed more than 10,000 jobs, just a fraction of their total workforces. Still, the decisions mark a shift in sentiment inside executive suites, where many leaders have been holding on to workers after struggling to hire and retain them in recent years when the pandemic disrupted workplaces.
Unlike Microsoft Corp. and Google parent Alphabet Inc., which announced larger layoffs this month, these companies haven’t expanded their workforces dramatically during the pandemic. Instead, the leaders of these global giants said they were shrinking to adjust to slowing growth or responding to weaker demand for their products.
Among the tech firms, Apple is one of the few firms that has not laid off employees, simply using normal attrition to offset any hiring trends. No matter the economic scenario, companies continue to balance their operations including optimizing the number of employees on the payroll.
Dr. Mark Robinson is the Director for the School of Business at Washington University of Science and Technology. Comments to the author can be sent to: mark.robinson@wust.edu. He is an alumni from Exxon Mobil and Deloitte.