TechLayoffs #IndustryTrends #JobMarket
Understanding Recent Tech Layoffs π»πΌ
Have you noticed the countless headlines about tech layoffs? Many wonder why this happens when the tech industry seems to be thriving. Let’s break this down simply.
Post-COVID Market Adjustments π¦ π
After COVID, many tech companies found themselves overstaffed because they hired aggressively during the pandemic. Why? Businesses shifted online, and there was a high demand for digital services. Now, as the world returns to a semblance of normalcy, the demand has stabilized. Companies had to make tough decisions to align with the current market needs.
Long-term Sustainability ππ
Tech companies don’t just focus on the present; they plan for the future. Sometimes, layoffs are a strategic move to ensure long-term sustainability. It allows companies to cut costs and maintain financial health, ensuring they can continue to innovate and grow.
Economic Slowdown ππ
Even though the tech industry is performing well, the global economy has faced slowdowns. Inflation, interest rate hikes, and geopolitical tensions can impact budgets. Companies, including tech giants, are cautious and preemptive with layoffs to safeguard against uncertain times.
Tech Industry Evolution ππ
The tech landscape constantly evolves. Emerging technologies like AI and cloud computing are taking the spotlight. Companies may lay off workers from traditional roles to invest in new, innovative areas. Itβs not just about cutting costs but reallocating resources.
Investor Pressure ππ°
Shareholders and investors want to see returns. Layoffs can sometimes be driven by the pressure to show profitability and efficiency. Trimming the workforce can improve financial metrics and appease investors.
When Will Tech Layoffs Stop? πβ
Predicting the end of tech layoffs is tricky. However, a few indicators could signal the slowdown:
- Stabilizing global economy
- Reduction in inflation rates
- Increased consumer and business confidence
- Balanced workforce aligned with market demands
In essence, the tech world is adapting to a new norm post-COVID, aiming for a balance that ensures future growth and stability. So, while layoffs seem abundant now, they’re part of a bigger picture to future-proof the industry.
Feel free to share your thoughts or questions in the comments! π¬π
Technology gets better, corporations become more efficient. Workers are redundant. Money trickles up.
>when is this going to stop?
Never. Eventually most work can feasibly be fully automated. Therefore we need to radically change our economies to support extensive unemployment.
The reason is immense overhiring during COVID monetary madness combined with a general increase in popularity of tech jobs.
It came to a point when companies hired people not because they needed a job done, but to hamper their competitors’ growth by depleting pool of available candidates.
This lead to extremely bloated headcounts in large companies.
Besides, big companies are anticipating an economical hard landing and are cutting expenses in advance.
There’s a few reasons, but the big reason is investors not seeing growth wanted other ways to improve profit margins. Arguably many companies were also over-staffed due to various moonshot projects, many of which were rolled back.
High inflation hurts tech companies two ways. It makes debt more expensive so capital expenses to grow are harder. It also means that as a business, they have to grow faster than inflation to get folks willing to invest money in them to help them grow.
In hindsight, realized that’s the same way just phrased slightly differently. But ya short of it. tech companies were built on ‘easy money’ of low interest rates, now interest rates aren’t low, and their required return is much higher.
As others have said there was over hiring during the pandemic. This was due mainly due to over exuberance driven by looser monetary policy (ie access to less expensive capital).
Naturally there followed a period of contraction, and an extended period of slower hiring growth. Itβs pretty clear this is also an overreaction, this time to tighter monetary policy (ie more expensive capital) and risk of overall economic recession.
The most important thing to realize is that CEOs/executive teams are no better at forecasting the future than anyone else. Additionally, the larger the company the more inertia any given strategic shift will have. So by the time the decision makers realize theyβve overcorrected/overreacted it can be months before course corrections start to take effect.
Finally, imo the biggest near term threat to jobs is not AI itself. Itβs the over estimation of AIβs capabilities by executives.
It’s a major change in how tech companies do business. Typically, most tech jobs are considered highly specific so they will lay off workers when business direction changes instead of repurposing employees. Sometimes it’s not even changes in direction sometimes it’s just they’ve found more efficient ways to run the business and don’t need as many people.
To put this in more simple terms let’s say you work for a candy company making chocolate, but the company is switching to making more hard candies. In traditional business the company would teach you to make hard candies, but in business today they will just lay you off and hire somebody that already has experience in making hard candy. Another example would be let’s say it takes 3 people to run the chocolate press, but now they’ve changed the process and only 2 people are needed. They lay off 1/3rd of the workforce because it’s more efficient.
Say you have 5 cows and 5 workers. All is good and solid. But three years in a row, you have the same net profit and the same salary costs. This is stable, but does not lead to company growth.Β
You *could* invest in another cow to grow. Or you could fire a worker to lower costs and grow your profit margins artificially (by overworking your remaining workers and not raising their salaries).Β
Is it sustainable? Often no, and you’ll need to hire another worker soon to replace him. But for this year, you’ve have 5 cows and 4 salaries and that means you can brag about having grown your profit.Β
Some of the companies massively over hired during labor shortages to make sure they had people to staff up projects. Now that worker of labor crunch is over they donβt need so many on the bench. Despite the big tech layoffs, most of the combines are still way above where they were pre-COVID.