Layoffs in the Tech Industry

Posted by on Feb 15, 2024 in Economics, Stuff You Should Know

In 2023, more than 260,000 jobs in the United States were lost in the technology industry. During the first four weeks of 2024, nearly 100 technology companies laid off about 25,000 employees combined. This included workers from Google, Amazon, TikTok, and Microsoft. Why are employees being let go in an industry that continues to innovate? 

Reasons For the Layoffs 

The recent layoffs in the tech industry are a result of several factors. One factor is that tech companies misjudged how much customers would use online technology after the COVID-19 pandemic lockdown ended. During the pandemic, companies hired thousands of workers to keep up with consumers who were performing more of their daily activities online. These activities included ordering food and groceries online and working from home. As the lockdown ended and more people resumed their previous routines, demand for tech products and services fell. Profits also started to decline. Companies decided that they could no longer afford to keep thousands of employees on the payroll and maintain the same level of profit.  

man in casual wear holding box with personal things and leaving modern office
There have been many employee layoffs in the tech industry in recent months.

Another factor causing tech industry layoffs is rising interest rates. When a company borrows money from a bank, it must pay back the original amount of money it borrowed. The company must also pay back a certain percentage of the loan amount as interest. The higher the interest rate, the more money must be paid back. This interest payment reduces a company’s profits. Some of the money made in profits must be used to pay the loan and its interest.  

Another reason for the layoffs in the tech industry is that tech companies have had to choose between budgeting money for new technologies, such as artificial intelligence (AI), or maintaining a large staff of employees. Many companies have chosen to invest in new technologies to stay competitive. They have cut staff in order to lower costs. In addition, investors have rewarded these companies that are carefully managing their costs. More investment helps increase the value of the company’s stocks. 

Finally, another factor why many tech companies are laying off workers is what business analysts call “copycat layoffs.” One tech company sees another tech company laying off workers and feels it must do the same. When one major tech company downsizes, or reduces, staff, leaders at other companies may start to question if they need to do the same to stay competitive.  

What About the Employees? 

Tech workers face an increasing amount of stress in their jobs. Employees that have survived several rounds of layoffs worry that they too will be let go in the future. Workers are expected to manage the same amount of work with fewer team members to help. In addition, as more employees are laid off, they face competition from their peers for jobs. Many workers have taken jobs in tech companies that pay less than what they used to earn. Others have applied for jobs that require skills they haven’t used in years, just to get hired. Other workers have stopped applying for jobs in the tech industry altogether, arguing that they want to find work that is more meaningful to them and that does not require long hours.  

Dig Deeper Research an industry that has experienced similar challenges as the technology industry. For example, you might investigate the telephone, music, or car industries. In a display, show how the industry evolved from its beginnings to today. Identify some of the challenges that the industry faced and how it resolved them. Share your display with the class.