Why are big tech companies cutting so many jobs?
Starting in the fall last year tech companies across the board began announcing major cuts to staffing. So, what’s behind the tens of thousands of layoffs?
The tech industry saw major growth during the pandemic as covid-19 shuttered offices transforming the way many workers performed their jobs. Remote work, increased shopping online and the rise of cryptocurrencies all aided the expansion of tech companies and their market valuations.
This led to a splurge of hiring for many companies but the economic winds began to change as central banks began to aggressively raise rates to put the brakes on rising prices. With valuations dropping and a global economic slowdown looming, investors are calling on companies to cut some of their excess employees and spending which has resulted in tens of thousands being laid off and more expected to come.
Microsoft expected to join other tech majors in layoff spree
Microsoft is just the latest major tech firm expected to shed a significant portion of its workforce. Various media outlets have reported on the plans by company that created Windows to axe around 11,000 jobs, or about 5 percent of its workforce.
Some of the roles that will reportedly be eliminated include those in human resources and engineering divisions. The formal announcement is expected before 24 January when Microsoft’s chairman and chief executive Satya Nadella will update investors on Microsoft’s financial performance.
Starting last fall, Amazon, Meta and Twitter announced planned or potential cuts of several thousands of employees. Since the belt tightening began the number of tech workers receiving a pink slip has climbed to roughly 180,000, according to Layoffs.fyi, a website that tracks tech job cuts. The pace of staff reduction isn’t slowing just yet with slightly more than 26,000 of the total positions cut occurring since the start of 2023.
Why are big tech companies cutting so many jobs?
Meta, the owner of Facebook, announced in November that it would slash approximately 11,000 roles in the company. The company had taken on 15,000 new hires last year, but chief executive Mark Zuckerberg told Meta employees that he had over extended. “I made the decision to significantly increase our investments,” he told employees, “Unfortunately, this did not play out the way I expected.”
Twitter’s new boss, Elon Musk, came in the front door with the axe swinging, chopping 3,700 from the social media platform’s headcount. After reluctantly following through with his acquisition of company for an inflated value he sought to make the platform, which was losing money and failing to attract significant numbers of new users, more profitable.
Amazon clarified earlier this month that it would reduce staff numbers by 18,000, about 6 percent of its workforce, the largest one-time cull of workers in its history. Like Meta, it went on a hiring spree during the pandemic but “given the uncertain economy” it was necessary to reduce the company’s headcount to prioritize “what matters most to customers and the long-term health of our businesses.”
Alphabet, parent company of Google, is expected to lay off almost 10,000 low performing employees starting early 2023. The move, while it hasn’t been announced yet, would curb costs as online advertisement revenue begins to dry up as companies brace for an impending global economic slowdown.