What's causing a string of layoffs in Tech: A deep dive

Layoffs have been making consistent headlines ever since 2022. From big corporations to startups, many businesses have had to hand the pink slip to their employees. But amongst these layoff news, one particular sector has taken the spotlight when it comes to cutting down staff- the tech industry.

In fact, data by AltIndex shows that around 2.02 lakh employees were sacked in 2022 in the tech sector. In 2023, the tech layoff toll has gone up to 2.26 lakh according to Business Today.

Notable tech layoffs of 2023

Mircosoft

In early January, the software-making firm announced it would be laying off 10,000 employees due to slow revenue growth. Mircosoft also took a $1.2 billion charge for severance costs. With a focus on downsizing its staff headcount, the big tech giant is going to continue sacking employees at the beginning of 2024 as well.

LinkedIn

Even employment-focused platform LinkedIn owned by Microsoft recently announced they will let go of an estimated 668 workers from the company. The affected departments will be engineering, finance, product and talent. Previously, the firm sacked 716 staff in May this year.

This may seem surprising despite LinkedIn recording a 5% year-over-year revenue jump this year.

Meta

Mark Zukerberg-owned Meta has also followed a similar approach to most of the tech companies. Last year in November, the firm let go of around 11,000 employees. On March 2023, Mark addressed his team in a blog post informing them about 2 more rounds of layoffs that will impact 10,000 workers at the company.

But that is not all, Meta is planning to sack employees from the Facebook Agile Silicon Team, or FAST in October according to Reuters.

Google

Google's CEO Sundar Pichai announced that the company would be letting go of 12,000 employees earlier this year. This number accounts for 6% of their global workforce, which includes Indian staff. Reportedly, more than 400 Indian workers lost their jobs at Google.

The layoff spree has not ended as the Calarfinia-based tech giant is planning to eliminate 40-45 jobs from Google’s news division reported by CNBC.

Amazon

E-commerce giant, Amazon planned to hand the pink slip to 10,000 employees but the number increased. In January of 2023, CEO Andy Jassy revealed around 18,000 staff will be sacked making it their biggest job cut ever. This year in March, Andy again announced another 9,000 fresh layoffs taking their total layoff toll to 27,000. The Seattle-based tech company laid off 500 employees from India in May across various areas.

While there are many factors contributing to the layoffs, let's take a deeper look at why big tech giants have been reducing their headcount recently.

Why are tech companies laying off employees?

It may seem absurd that big tech giants such as Microsoft, Meta and Google who are heavily invested in AI projects currently are cutting down staff in such large numbers. Here are some reasons why this is happening.

Inflation

As living costs get higher, businesses suffer, especially tech companies. According to Bloomberg, inflation has been the main culprit of eating away profits in this sector. In order to control the hiked price of services and cut down expenses, employees had to be let go.

Less recruitment and AI automation

Since tech companies are letting go of their employees, it also means the demand for HR staff will decrease which is why a lot of layoffs are from the recruitment division. Another reason is automation. While AI may not taken over jobs entirely it has affected certain areas.

In fact, the World Economic Forum's “The Future of Jobs Report 2020" reveals that AI will replace around 85 million jobs. The good news is the same study estimated the AI industry will also create an estimated 97 million jobs at the same time.

Over-hiring during pandemic

Tech companies had gained a fair share of profits during the pandemic which led to firms hiring too many employees. In fact, salaries hit record highs and made headlines as businesses rivalled to hire top talent. However, this may have backfired as economic downturns such as post-pandemic recovery, Silicon Valley Bank collapse and global inflation.

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To increase profits

Another reason is that the current economic conditions have not entirely favoured tech companies which is why their revenues have slowed down. This is why investors have pressured the firms to lower staff members in order to reduce costs. From Meta, and Google to Microsoft, all organisations had to comply with the investors which ultimately led to massive layoffs.