The layoff wave

Employers have primarily cited “restructuring” as the cause of mega tech layoffs in the United States with fewer companies blaming store or plant closers and economic conditions. Examples of this are evident in high-profile tech layoffs at companies such as Google which announced layoffs in January as part of a large-scale reshuffling, saying the company is shifting to “[invest] in our company’s biggest priorities.” A month earlier, the company launched its Artificial Intelligence bot Gemini. Other big tech rivals such as Microsoft, Apple, Amazon, and Meta have all announced cuts this year just as they look to ramp up their AI efforts.

This year’s layoffs are typically smaller and more targeted than the layoffs a year ago. Although economic factors are the main reason for tech layoffs, many companies were citing the race for Artificial Intelligence as a factor, as they were shifting resources to focus on AI talent.

The spate of layoffs continues in the tech industry in the US — from big tech corporations to start-ups, enterprises at all levels seem to be swept away by the way of rampant layoffs adding to the woes of millions of employees.

In the first two months of 2024, we have seen about 193 companies laying off nearly 50,000 of their staff. Incidentally, in March so far seven companies have laid off close to 500 employees. Considering the rapid pace at which companies are resizing and undergoing an organisational overhaul, it seems there’s more to worry about for millions of tech professionals.

A new report by AuthorityHacker claims that as many as 54.58 per cent of workers are increasingly worried about the possibility of job loss, and the tech sector is visibly distressed the most. The report states that professionals working in IT-Services and Data (89.66 per cent) and Software Development (74.42 per cent) are experiencing the highest levels of anxiety related to job security.

There seem to have been two main waves of job cuts in recent years. The “early COVID” spike, from the first to second quarters of 2020, and the “interest rate hike” effect, which has been going on since the second quarter of 2022.

Meanwhile, Indian tech workers who were laid off from companies like Twitter, Amazon, and Microsoft in the US last year are struggling to find jobs back home. They have been forced to take huge salary cuts and often undersell themselves to find employment in India. They have returned at a time when Indian companies are also laying off employees and have been struggling to navigate the tepid job market.

Experts opine that Indian employers are also sceptical as they fear these workers will go back to the US at the first opportunity.

They come with hefty salaries too and hence, they are over-qualified for the role or they are not able to take up their offered compensation.

According to an analysis by CompTIA, which tracks employment trends in the tech industry, job postings in “Artificial Intelligence or requiring AI skill increased by about 2000 from December to January, to 17,479”.

So, even as the industry sheds some jobs, it’s also hiring aggressively in others. There were 33,727 active job postings in January, according to CompTIA, the largest month-over-month increase in 12 months.

“I do feel like most of the layoffs have happened, and companies are going to start to rebound,” Bert Bean, chief executive of staffing company Insight Global, has been quoted as saying. “But it’s still very uncertain.” He expects the market to remain that way for about the next two quarters, “until the Fed really comes out and starts to cut interest rates”.

In recent months, falling inflation had fuelled market bets that the Federal Reserve could begin cutting rates from their 23-year high at its next meeting in March. But Fed chair Jerome Powell said earlier this month that the central bank still needed “greater confidence” that inflation was “sustainably” lower, as the bank held rates for a fourth straight month.

Before layoffs, tech companies were more renowned for workplace cultures that serviced employees with free benefits and premium amenities in state-of-the-art offices. But gourmet chefs and meditation rooms weren’t introduced just to keep workers on site for as long as possible — they were a means of attracting talent. Scott Dobroski, career trends expert at Indeed, in San Francisco, has been quoted as saying that candidates — particularly in tech – are attuned to employer branding and company culture.

This changed following the pandemic. As the economy faltered in 2022 spring, rising inflation and interest rates curbed companies’ growth. This initially led to hiring freezes, and then industry-wide layoffs in late 2022, which are ongoing. “Covid-19 was a once-in-a-generation event that changed companies’ trajectories, overestimating demand and sending them into hiring sprees,” Dobroski added. “After coming too strong out the gate in 2021, tech companies had to suddenly pull back their recruitment.”

The tech sector has consequently become less desirable for many workers. According to Indeed’s Best Jobs of 2024, measured by salary, flexibility and growth, only three in its top 25 are tech roles, versus 11 in its 2023 edition.

“While tech jobs continue to command high salaries and offer above-average levels of flexible working, they’ve fallen significantly in terms of growth,” said Dobroski. “Job seekers typically want to join companies that are flourishing, in which they feel they can grow. But when layoffs are announced, that doesn’t only reduce opportunities to move in the job market — it harms employers’ reputations and signals uncertainty.”

It’s not just job seekers put off by tech roles. Current employees in the industry report feeling disenchanted as well.

In a recent interview with Morning Brew Daily’s podcast, Mark Zuckerberg said companies are still adjusting to the post-pandemic era. The Meta CEO has a theory for why tech layoffs aren’t slowing down: Companies realise that, while painful, there are benefits to being “leaner”.

During the pandemic, e-commerce sales went through the roof, which drove big gains in online advertising. But as people returned to stores and the economy adjusted, sales growth ebbed and ad rates returned to Earth. Many companies, including Meta, realised they had over-hired and had to make major cuts. That was the first wave of layoffs.

“In terms of the layoffs and stuff like that, I actually think that was more due to companies trying to navigate Covid,” Zuckerberg said in the interview when asked if tech layoffs had to do with the AI boom.

He said that companies are no longer shrinking their employee size simply because of overhiring — they’re now realising there can be benefits to being leaner.

While many tech companies were initially reluctant to make cuts, they realised it didn’t spell the end, Zuckerberg said.

“It was obviously really tough, we parted with a lot of talented people we cared about,” Zuckerberg mentioned in the interview, speaking specifically about Meta’s past layoffs. “But in some ways actually becoming leaner kind of makes the company more effective.”

The rapid rise of Artificial Intelligence (AI) technology has also been a major concern for employees. As many as 72.42 per cent of workers surveyed admitted that they are feeling uneasy about the impact of AI on their jobs over the next five years. Alarmingly among the respondents, almost half (48.28 per cent) fully agreed that AI will impact their job security. Among those expressing the most apprehension are C-level executives (85 per cent) and directors (78.83 per cent).

Based on the size, recent reports highlighted that employees in companies as large as 500-1000 employees (74.33 per cent) particularly feel they are vulnerable as they perceive a higher risk of job loss. Meanwhile, sectors that rely heavily on computers such as software (67.44 per cent), finance (67.75 per cent), and Human Resources (64.29 per cent) expressed high levels of concern about job loss.

On the other hand, sectors that involve human interpersonal interactions such as education (43.04 per cent) and real estate (44.68 per cent), seem to be least concerned about the impact of AI on their jobs. The survey by Authority Hacker was conducted on 1,200 full-time employees across the US.

Based on popular trends and the efficacy of AI models witnessed, one should understand that AI will not solely lead to job displacements, it may even create new kinds of opportunities. In fact, a recent report by the World Economic Forum forecasted that AI could likely create as many as 97 million new roles by 2025.

Incorporating AI tools into daily operations, nurturing interpersonal skills such as communication and empathy, cultivating professional networks, and fostering specialised expertise and personal branding will be crucial in withstanding the AI wave. Popular studies indicated that a vast majority of executives anticipate AI to augment rather than replace job roles, reinforcing the importance of AI upskilling in mitigating unemployment risks.

Views expressed are personal