Eight months ago, large tech companies like Amazon, Google, Twitter, Apple, and Meta were booming. Their stocks were at all-time highs, and the demand for their products and services was endless. The companies, collectively known as “Big Tech,” were some of the largest companies in the world, and showed no signs of slowing their growth.
However, things have changed drastically since then. These companies, which were flourishing during the pandemic, are now left scrambling to reduce costs. The immediate solution to this was laying off workers, which occurs when companies discharge their employees indefinitely, usually en masse. Within the past two months, there has been an unprecedented amount of layoffs. Data analyst source CrunchBase states, “More than 88,000 workers in the U.S. tech sector have been laid off in mass job cuts so far in 2022.”
Layoffs are a terror both for the employee and the employer. People are left jobless, while companies seek replacements for their workers. So why are these large, employee-focused companies voluntarily laying off some of their most valuable assets?
When people foresee a recession, a period of time when company value and stocks go down, a general trend by consumers is to spend less. When consumers buy fewer products and fewer stocks, general company sales go down. In an industry like tech, so much of profit is due to consumer usage and purchase, so this revenue decrease becomes even more apparent. This prevents companies from paying as many employees as before, forcing them to cut labor costs through layoffs.
Let’s take a close look at Meta. Meta’s unfortunate situation has resulted in the layoff of more than 11,000 employees, around 13% of their entire workforce. This is in addition to a hiring freeze that will supposedly continue until mid-2023. In Mark Zuckerberg’s letter to Meta employees, he mentioned the main reasons for his actions. Due to Covid, Zuckerberg predicted an increase in uses of the online world and Metaverse. In order to keep up with rising customer demand, he hired more employees and increased investments in certain areas. Unfortunately for Zuckerberg and Meta, these demands were temporary; the Metaverse eventually began to decline. His solution: layoffs. The company’s rocky history further increases speculation about the decline of Meta itself.
Along with Meta, Twitter has laid off half of its employees, and with newly instated CEO Elon Musk, expectations are confusing for employees. The environment has become more difficult now, and the company’s employees are constantly scared about losing their jobs. Amazon, too, has laid off 10,000 people. For more information, the website layoffs.fyi tracks all of the companies who have laid off their employees, including the percentage of workers laid off.
The aftermath of these layoffs has left thousands of employees in precarious financial positions. Especially in California, where the cost of living is so high, losing your job is an absolute nightmare.
It is undoubtable that tech companies have undergone harsh times in this past year and recession. However, we firmly believe that although challenging, Big Tech giants can still make a full recovery and return to their maximum outputs. In order to recover, it is necessary to trace back to the root of the problem. Most of the problems stem from concerning economic headwinds, combined with the hiring splurge during the pandemic. With the global economic consequences of the war in Ukraine, companies are struggling to keep afloat and are forced to lay off their employees. Big Tech companies have undergone very significant recessions like this before, specifically in the Great Recession of 2009, but were still able to recover. However, we particularly fear for the futures of startups & small companies. The tech industry is very hard to disrupt, with large companies owning most of the market share. Smaller companies will thus have a very tough time surviving these layoffs and this economic scare. Sadly, this will likely lead to the demise of many of these small companies.