American tech firms have cut more than 77,000 jobs since the year 2023 began. Despite experiencing explosive growth in recent years, tech giants frequently release their workers to save costs. It has led them to receive severe backlash online. Critics have raised an alarm about these Silicon Valley capitalists making huge profits yet feeling the need to fire employees.
A tracking website layoffs.fyi indicated that more than 1,000 US tech companies laid off more than 159,000 employees in 2022. With nearly 80,000 in the second month, analysts predict a much larger number this year.
Every giant cited identical reasons for this mass layoff. Collectively, they blame post-COVID economic crises, inflation, interest rates, and the hiring boom during the lockdown period. However, critics suggest other factors that are often shielded from public knowledge.
Fear of Inflation
Mark Zuckerberg’s Meta kick-started the recent mass layoff spree in November 2022 by taking jobs from 11,000 employees. 2 months later, Jeff Bezos’ Amazon followed suit by announcing the fate of 18,000 employees. Microsoft, which hired nearly 40,000 people in 2021/2022, axed 10,000 in the first month of 2023. In the same month, Google also reduced its workforce by 12,000 members.
Reportedly more than 240 companies have done the same while Apple is the only giant that has not sacked anyone yet. The level of these job cuts has surprised many since inflation still hasn’t damaged the US tech industry that much. Inflation in the US has shown signs of easing after dropping to 6.5% from 9% in 2022. However, it is still quite high and tech firms fear that consumer spending will soon drop, leading to a worse situation.
Testing the Giant’s Resilience
Silicon Valley has historically thrived under major economic upheavals like the Great Recession and Coronavirus. It might have stumbled but never stayed down. Whenever it laid off some employees, it rehired more in great numbers.
However, the fear of potential recession threatens its revenue this time. So in anticipation of a downfall, a company can either raise prices or reduce expenses. In the case of tech giants, they have seemingly decided to choose the latter in the form of job cuts.
Another issue with the tech firm is its fast-paced innovation. As the tech trends keep shifting, several strategies get left behind, and so do the teams working on them. Thus, even highly successful corporations have to cut some jobs in order to fund others.
Profits amid Inflation
The companies in question are some of the world’s biggest cash cows. So, it was difficult for critics to fathom how potential inflation could affect them. Almost every tech giant reaped heavy profits while commoners cried for food, fuel, and housing.
In the final quarter of 2022, Microsoft reported revenue of more than 52 billion USD, which was a 2% increase from the last year. However, its 16 billion USD net income dropped by 12%. The software giant was also trying to purchase game developer Activision Blizzard in 2022 by offering 69 billion USD in cash. Similarly, Meta and Amazon also saw a dip in profit, but the overall amount was still higher than 4 and 3 billion USD respectively. Therefore, it bothers critics because paying the salaries of employees is a non-issue with this much money.
Tech giants have tens of billions of dollars in reserves but they would not use it to support business operations or pay salaries. They are only concerned with making more money than the previous year. So for example, if Google made 69 billion USD instead of its estimate of 70 billion, the shareholders will get worried and take panic decisions, such as reducing the payroll.
No Need to Worry About Laid-off Workers
It’s the tech giants who are at loss, not the workers. These professionals have a high chance of getting a better job elsewhere. Around 9 million tech workers contribute more than 10% of the US’s entire GDP. Even other industries search the tech sector for hiring, consultation, or other investments. It is mainly due to these workers, tech giants are able to survive in tight economic conditions. Moreover, the Small Tech will now have a chance of hiring talented and experienced engineers.
Tech giants, on the other hand, face a risk of losing their credibility and reputation if they continue the cycle of over-hiring and downsizing. Employers’ treatment of released workers matters the most. Several studies have shown how the layoffs have impacted the firm’s image. Recently, Twitter layoffs were probably the most controversial ones. A survey of 442 former Twitter employees revealed that 95% of them felt the social platform did not treat them with empathy and dignity. And, 91% of them said that they would not recommend Twitter as a workplace to family and friends. Despite the backlash, Elon Musk also had to face some funny memes because of how he ran the social website.