The technology sector has seen exponential growth, especially throughout the pandemic. However, recent months have seen significant layoffs across Big Tech. Google, owned by parent company Alphabet, has announced plans to lay off 12,000 people from its workforce. Similarly, Microsoft is letting go of around 10,000 employees, and Amazon expects to lay off more than 18,000 employees, the largest workforce reduction in its 28-year history.
Given how the tech industry is reshaping its workforce, it’s essential to understand why companies are making this change and how things will move forward. Listed below are three takeaways from Big Tech’s layoffs.
Over-hiring and inflation cited as the main reasons
As mentioned, the tech industry was at an all-time high during the pandemic. Tech products and services have become critical to businesses and people who transitioned to work online, contributing to a surge in hiring to keep up with increasing sales. But with the cooling economy, companies had no choice but to lay off workers to maintain profits and payroll. Tech CEOs, from Meta’s Mark Zuckerberg to Salesforce’s Marc Benioff, have admitted that they over-hired early in the pandemic and misread the surge in demand for their products. In addition to its large, unsustainable workforce, Big Tech also struggled with the economic downturn. In June 2022, prices increased by 9.1%, the highest inflation rate in 40 years. There were also plenty of recession fears and investor pressures, forcing tech companies to cost-cut by laying off employees to reduce their spending.
Remote tech jobs are still in demand
With the economic downturn and layoffs, more people are worried about retaining their current jobs or securing new ones. As much as 78% of American workers that do remote work are concerned about being the first to lose their jobs if layoffs become necessary. While some Big Tech companies will resort to this approach, the tech sector still relies heavily on remote talent. Even with more employers transitioning towards bringing employees back to the office, there is still a global skills shortage — allowing skilled employees to leverage the ability to work at home at least part of the time. Furthermore, plenty of traditional industries still need tech employees, circulating demand for engineers and people with high-tech skills. Employees looking to be retained in their current role must adapt to technological advancement by investing in and building fit-for-future skills.
Increasing concern over mental health
Although jobs remain available, it can still be difficult for workers to secure quality roles to support their livelihoods. As described by multiple scientific studies, these layoffs can negatively affect employees’ mental health. Research across countries like the United States and New Zealand has shown that the stress of layoffs is linked to a higher risk of suicide and increased mortality by 15-20% over the following 20 years. Furthermore, job insecurity can demotivate workers and lead to mental health issues like anxiety and depression. These negative feelings can also impact those who didn’t lose their jobs. As described by Bentley University professor Aaron Nurick, this comes in the form of “survivor’s guilt” as well as a sense of “I might be next,” often leading to poorer productivity.
While most Big Tech companies have turned to mass layoffs, smaller tech companies like Intel have minimized layoffs by cutting managerial salaries. CEO Pat Gelsinger is said to receive a 25% cut to his basic pay, whereas his executive leadership team will see a decrease of 15%. Not only are these changes more sustainable in driving digital transformation, but it also lessens the concern of mental health problem among existing and previous employees.
With the shifting economy, only time will tell when tech layoffs will stop. For updates on Big Tech and its products, visit our technology category for more details.
