Many Big Tech companies (such as Meta, Amazon, Salesforce, Twitter, etc.) have been reporting a significant number of layoffs since the beginning of the pandemic. This rising trend of tech layoffs in 2022 has many people worrying about what’s to come. So, what exactly led to this, why are there so many tech layoffs, and what should we expect in the future? We hope this article can inform you better about the issue and help you explore alternatives in your career.
What has been happening in the tech industry?
As you’re probably aware by now, there has been a high number of tech layoffs in the recent months, along with pauses and slowing in hiring processes. This includes big names like Amazon, Lyft, Twitter, etc. But it’s not limited to only Big Tech names; several other companies were affected by this trend, and it even led to bankruptcy in a few cases (one notable example is Katerra). These large-scale layoffs have created negative influence for these companies in the public eye. While impacting their reputation, it also cost them significant amounts of business. However, their most devastating effects have been on the employees themselves. Along with leaving lots of people jobless and disrupting their livelihoods, these layoffs have caused fears of deportation in many employees that came in from foreign countries for the opportunity to work with these tech giants. As a result, there has been (and still is) a great anxiety surrounding work in the tech industry.
The most significant layoffs
San Francisco-based entrepreneur Roger Lee has created a website called Layoffs.fyi that has a tech layoff tracker which includes all the significant tech layoffs since the pandemic. According to his data, here is a list of the most significant layoffs since the pandemic:
- Meta: 11,000 employees (November 2022)
- Amazon: 10,000 employees (November 2022)
- Booking.com: 4,325 employees (July 2020)
- Cisco: 4,100 employees (November 2022)
- Twitter: 3,700 people (November 2022)
It’s also worth noting that, with Twitter specifically, the recent tech layoffs after Elon Musk's acquisition of the company might have different reasons. However, Jack Dorsey (the previous CEO and owner who recently stepped down) also recently apologized for having “grown the company size too quickly” before Musk took over.
Update on 09/01/2022: For their cost-cutting plans, Salesforce and Amazon has announced that they will be increasing their lay-offs. Salesforce gave "hiring too many people during an economic downturn" as a reason for deciding to lay off 10% of its workforce and downsize their office space. Meanwhile, Amazon's Chief Executive Andy Jassy sent out an email to employees stating that they're planning to eliminate 18,000 jobs, focusing on HR and Amazon's large online shopping division Stores. Stores include teams managing the company's main website, field operations, warehouses, physical stores and some other consumer teams.
What prompted these layoffs?
Here are some of the main problems and reasons that have led to recent tech layoffs:
Overestimating growth potential
Many tech companies were overjoyed that the pandemic and working from home meant everyone would be ‘more online’. As a result, they grew their companies by a large margin, hoping that they would be able to balance this investment out through the profits. However, this wasn’t always the case, as a considerable amount of these businesses either lost money, had to make cuts, or went completely bankrupt.CNN writer Catherine Thornbecke declares: “Silicon Valley operates on many myths, but one of them is the idea of the founder as a visionary who can see key trends coming years if not decades out.” This was exactly what happened with Meta. Zuckerberg recently had to cut off 13% of the entire company at the beginning of this month. Later on he shared a statement regarding the Meta layoffs, taking accountability for his miscalculations, stating that he thought the growth during the pandemic would be a more permanent trend.
Overhiring in the pandemic
As part of overestimating company growth, many companies tried to expand their reach by hiring more and more employees during the pandemic. Later on, similar to Meta, they had to reduce their numbers to compensate for their losses. A similar guilty party of this was Amazon. Due to overhiring, the shifting of the economy, and “disappointing earnings'', at the beginning of November, Amazon lost $1 trillion of market value. It became the first US-based and public company to do so in history.
Increase in Federal Funds rates
The Federal Funds rate is decided upon by the Federal Open Markets Committee (FOMC), and determines everything from credit card balances to annual rates on savings accounts. It “provides a reference for institutions as they are borrowing or lending reserves”, as described by Forbes. This means that, essentially, this rate has a controlling effect over the current economic structure of the country. The rates in March 2022 were 0.25% to 0.50%, whereas today, as of writing this article , the rates are at almost four times they were in March, with 3.75% to 4.00%. These rates are statistically raised when there is too much inflation, and consequently, it has been rising steadily since the beginning of 2022. This increase has been a key component of the growth in tech layoffs for US-based companies.
Fear of a probable recession
Along with the existing reasons we mentioned so far, like the uncertainty brought on by the pandemic, the fear of an approaching economic recession also caused some companies to make cuts in preparation. The steady decline of the global economy has had many people worrying, and taking preemptive measures seemed like the safest and smartest decision in the long run. Of course, there is no way of knowing for certain if a recession will happen beforehand, but it’s best to always stay up-to-date and informed about the economic situation regardless, especially if you’re running a business of your own. You should keep an extensive record of your payments and finances so that you never have to take such precautions or deal with financial anxiety.
Most affected roles during the tech layoffs
The three most affected departments during the recent tech layoffs are:
- Marketing & sales
It’s not very hard to imagine why these roles were the most affected. Within a tech firm, non-tech jobs are usually regarded as more ‘expendable’ in times of crisis, which causes them to go first. Sales and marketing roles especially are directly tied to the success of the market. And when there is an economic crisis, these roles become less useful to companies. Similarly, recruiting roles are also made redundant when a company is no longer looking to hire.
Other industries are also affected
This trend of tech layoffs isn’t a one-off thing, it’s just that they have taken the majority of the damage. However, the entire business world was affected during the economic shift.Two of the most affected sectors besides tech are: Finance (banking), and the healthcare sector. There are several different reasons for this that vary significantly. However, the most important one is that these are both industries that heavily operate online, meaning that they commonly employ online working and hybrid business models. This meant that they relied on the tech industry to run their business, and the fluctuation in this sector negatively affected their businesses as well.
How long will this continue?
Many are trying to predict whether other Big Tech companies will join in on the tech layoffs, including the workers themselves. For example, CNBC reports that Google employees are reporting a massive increase in anxiety due to the current state of the industry, even though there haven’t been any Google layoffs yet. Experts have varying opinions about whether this will be a long-term issue or not. All they agree on is that it doesn’t seem to be stopping anytime soon. The global economy is worsening, and the Federal Funds increase continues. This could all lead to a continuation of the layoffs, or just a simple stop in growth.
Freelancing is promising
The anxiety regarding job security led many people to wonder what they can do next. The best option out there is to explore the wondrous world of freelancing and remote work. Freelance work provides a lot of autonomy and flexibility, an improved work-life balance, and the ability to work with anyone, anywhere. If you’re also a victim of these recent tech layoffs, you might want to look into freelancing as a more viable career option. You can also check out LinkedIn’s own online course for “Bouncing back after a layoff”, which you might refer to as a way to discover your other options, and decide on the best approach to keep going in your career. Register with Ruul now to take your career under your own rule. With Ruul’s robust payment, invoicing, and legal services, you’ll streamline all your tasks and store the necessary information –all in one place.