Tech companies are laying off thousands of workers. What does this mean for the industry?


Multiple tech companies have announced layoffs this month, prompting worker outrage and frustration, but should tech expect the same number of cuts as last year?

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From Google to eBay, tech companies this month have announced new waves of layoffs after more than 260,000 workers lost their jobs across the industry last year.

In some instances, employees posting about layoffs have gone viral, with reaction videos ranging from shock to resigned indignation.

Google’s worker union described employees as “outraged and more frustrated than ever” as the company prioritised “efficiency” over the people responsible for its success.

So, what’s behind these cuts?

Which companies are laying off workers?

There have been multiple reports of layoffs from Google this month, with a spokesperson telling Euronews Next last week that the tech giant is “responsibly investing in our company’s biggest priorities and the significant opportunities ahead”.

Last year, Google announced 12,000 job losses in January, with cuts continuing towards the end of 2023.

This year, “some teams are continuing to make these kinds of organisational changes, which include some role eliminations globally,” a spokesperson said, but the number of cuts is so far unclear.

US tech website The Verge reported that CEO Sundar Pichai warned in a memo last week that more cuts should be expected.

Online marketplace eBay announced this week that 1,000 roles, or roughly 9 per cent of full-time employees, would be cut.

“Additionally, we plan to scale back the number of contracts we have within our alternate workforce over the coming months,” CEO Jamie Iannone wrote.

Meanwhile, Discord, the instant messaging platform, confirmed reports that they laid off 17 per cent of workers at the company or some 170 workers.

TikTok is also laying off a few dozen workers in the US, Asia, and Europe but is also opening 150 new roles, the company confirmed to Euronews Next, while Amazon-owned video game live-streaming service Twitch announced 500 job cuts earlier in the month.

Other Amazon-owned services have also announced layoffs.

Why is the tech industry laying off more workers?

Peter Cappelli, a professor of management at the University of Pennsylvania’s Wharton School in the US, told Euronews Next that at Big Tech companies, the recent layoffs did not appear to be related to the economy.

“I don’t think it has much of anything to do with business demand, it stems from investor complaints that these companies must be overstaffed,” he said in an email.

If they were actually overstaffed, freezing hiring could shrink the number of employees, he added, so they are “laying off to please the investor community who want to see quick cost savings”.

John Van Reenen, a professor and economist at the London School of Economics, said the industry “had a tough year last year mainly due to over-hiring during/post-pandemic”.

“There was a huge boom in demand for IT due to remote work, online shopping, etc. Some of this reversed post-pandemic to a greater extent than the companies imagined,” he added.

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According to layoffs.fyi, a start-up that keeps track of tech companies’ layoff announcements, more than 260,000 employees were laid off in the industry last year.

How could 2024 compare to last year in the industry?

Van Reenen doesn’t expect the job cuts to be as bad this year for large tech companies.

“The Big Tech companies have very high valuations, so this indicates that markets see strong future growth prospects,” he added.

Overall, high turnover in the industry also shows it is “still a strong market and long-term prospects remain good”.

This month there have been more than 13,000 layoffs in tech, according to layoffs.fyi, but that figure is much lower than the almost 90,000 job cuts announced in January last year.

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Cappelli at the Wharton School said that the tech industry tends to refrain from developing its workers, preferring to hire externally.

“But, it isn’t as though anything they are doing now has suddenly become obsolete, that they need to drop competencies,” he said.

Paying people off to leave, while knowing that you have to hire soon “doesn’t make much economic or business sense” but rather makes sense “to boost the immediate metrics that industry analysts are looking at right now,” Cappelli added.

The layoffs have, however, contributed to “chaos in the workplace,” according to Stephen McMurtry, communications chair for the Alphabet Workers’ Union which represents US-based Google employees.

“For the first time in the company’s history, we are seeing layoffs become business as usual at Google. We have lost nearly 15,000 coworkers to rolling layoffs over the past year, and the only way it will stop is if we organise against this practice,” he said in a statement posted to social media platform X last week.

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“The truth is that these layoffs cause chaos in our workplace, leaving us with increased workloads and widespread anxiety over which team will be the next to disappear overnight”.



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2024-01-25 09:21:12

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greg@ainewsbeat.com

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