#015  The Truth Behind Tech Layoffs: A Recruiter's Perspective  

A recruiter reveals the top 5 reasons for tech layoffs and how the future looks like for techies.

Acc. To Layoffs.fyi , the tech industry has seen a difficult period, with layoffs, to name a few, Google affected over 12,000 people and those at Amazon affected over 18,000 people .

For those of you who don't know about Layoffs.fyi check out my previous short video. I’ll put the link in the description below. 

As a technical recruiter, I was curious to know what exactly are the drivers behind these layoffs and how’s the future looks like for techies. That led me to research and find the actual reasons that have impacted so many lives. 

During my recent research on layoffs, I found there are 5 top reasons for tech layoffs. To start with, one of the key factors is 

Reduced E-Commerce Activities:  In March 2020 when COVID hit, everyone was stuck in their homes and relied heavily on doing things online from shopping via Amazon, binge watching Netflix to food delivery via apps like DOORDash, Uber eats  and so forth. The growth for all such companies increased exponentially including Meta, Google, and Shopify to name a few. 

Seeing the rapid rise in the business, the leaders of such companies started giving projections of massive growth in the years to come. Because they expected this shift to become permanent, tech companies started hiring aggressively to fulfill their current and the near future demands.

Not only did hiring increase the headcount for the companies, but they also ended up paying higher salaries to new hires.

Fast forward to mid last year, when things improved due to the introduction of COVID vaccines, people went back to their pre-pandemic routine, such as shopping in person, traveling, and dining out in restaurants. 

Subsequently, the reliance on online services has reduced to a great extent. This led to laying off employees who were no longer needed.

Next, the second reason is 

Uncertain Economic Situation: For many companies, laying off  employees is their emergency strategy when demand for products and services decrease, and they let go their low performers and non-essential employees first under the name of layoffs.

Many studies reported that the economy had been shrinking for the two consecutive quarter due to the war in Ukraine, inflation, and fading pandemic situation. 

Plus, some of the research highlighted that it was not the AI breakthrough such as ChatGTP that led to the recent layoffs. 

For those who don’t know ChatGPT is a chatbot that allows you to have human-like conversations and much more advanced things.

This led to the third reason which is

Pressure From Venture Capitalists: 

Let me first explain who venture capitalists (VC) are in simple terms. They are  the investors who provide monetary funds to companies that show high growth potential. The reason investors risk investing in such companies is because they can earn a massive return on their investments if these companies are a success.

Now, back to layoffs,

The push from investors was also one of the other reasons for layoffs in big tech companies. Due to the uncertain economy, many investors were concerned about the companies profitability and thus forced many companies to reduce expenses. 

Some companies facing pressure from investors are Alphabet (Google's parent company) and Meta.

Moving along, the fourth reason for layoffs is 

Companies Fixed Mindset on Declining Revenues: Most companies have a fixed mindset that when revenue declines, layoffs will increase profitability

This has been proven by experts who point out that most companies believe that layoffs would improve  profitability regardless of economic conditions. Consequently, layoffs happen.

This brings me to the final reason when 

Some Companies Imitate their competitors: According to academic studies most companies copy what their competitors are doing to stay profitable. They believe if the other companies can let go, say, twelve thousand employees and still work as usual, why don’t they?

Having said that, it’s quite evident that layoffs will likely continue as companies restructure and cut back their salaries in an attempt to please investors and boost profits.

Now, the question comes, what’s the future looks like for tech professionals.

Let me tell you, even though tech layoffs are happening, there are some companies who are still in need of quality talents. The future of work is still connected to technology and thus tech professionals with skills will stay in demand forever.

With that, I hope you now have a clear picture why layoffs are happening and what’s the future of our skilled techies.