Tech Layoffs are not over

Hi everyone! 👋🏻

This week, we’re going to cover two burning questions:

Can the trend of tech companies making layoffs continue?

What are they mid/long-term consequences?

Let’s dive in! 🤿

Some recent Layoff Stats April 2024

As a start, just as a reminder, some stats.

The tech layoffs that have happened in the last two months (as of April 2024):

• April 2024: Tesla (2,688 employees), Apple (614 employees in self-driving car project), Checkr (382 employees), Amazon (hundreds in sales, marketing, and physical stores), ChowNow (60 employees)

• March 2024: Dell (6,000 employees), Synctera (17 employees), Stash (80 employees), Inscribe.ai (40% of staff), Meta (less than 50 employees), Deadspin (entire staff of 11)

Since the start of the year: 75,000 layoffs across 266 tech companies according to layoffs.fyi.

It’s interesting to see the industry breakdown, with Retail, Consumer, Hardware and Food being the top ‘offenders’, but with Transportation playing catch-up especially in 2024:

You can get the full-list up to date here (with company-by-company):

Will this trend continue?

To deep-dive on this question, we’ll start with the last addition to the party: Google.

The most recent layoffs (more than 100 people of ‘Core’ team, with the intention to restaff them in India and Mexico) coincide with the company seeing its fastest growth rate since the beginning of 2022 and rising profit margins. Alphabet had last week stated that it will be paying out a $70 billion repurchase and launching its first dividend, with revenue up 15% from the same period last year.

This counterintuitive trend highlights two key points. Firstly, it suggests potential underlying issues within the tech sector, possibly linked to slower growth or over-hiring during the pandemic boom. Secondly, it throws into question the traditionally perceived stability of tech jobs. These layoffs could have a ripple effect, discouraging potential tech talent and impacting the industry's future. The reasons behind this trend and its long-term effects deserve further investigation.

It’s also bitter to see that the companies speaking loudest about AI not cutting jobs are the ones doing that the most, not because it is actually saving them time, but to save costs to be reinvested in hardware for AI expenditure:

Anna Tavis, clinical professor in human capital management at New York University, believes that all industries will continue to “right size” their staffing levels in pursuit of efficiency, cost cutting, and rationalizing their skills portfolio.

So, one meter to understand if this trend will continue should be to reflect on companies’ true unit economic stability and financial health. This fundamental business aspect has been severely de-prioritized in the last decade, with low (or negative) interest rates allowing Venture Capital to play the dice a lot more easily - and which spurred ‘growth at all costs’ cultures, that have included giants like Uber, Lyft and many more who overspent for years before making profits, if any.

What are the possible consequences of this trend - if it’s ‘here to stay’?

Survivor’s Guilt

‍Forbes notes that team members that “survived” layoffs suffer a 41% decline in job satisfaction, 36% decline in organizational commitment, and 20% decline in job performance. What can managers and team leaders do to combat this issue and bring psychological safety back into the workplace?

Mobility: The showdown

This report by BCG finds 1 out of 4 professionals actively seeking jobs abroad. People in Africa and the Middle East are most likely to seek jobs abroad. This is likely due to a combination of factors like high population growth, lower income levels, and higher unemployment in these regions. In contrast, people in Europe, North America, and parts of Asia-Pacific are much less likely to look for jobs outside their home countries. This is because these regions have strong labor markets, high wages, and low unemployment, giving people less reason to leave.

Clearly, this is followed by a high interest in ‘virtual’ mobility, so looking for jobs from employers in other countries:

And unsurprisingly, higher tendency to be more mobile where population is growing most:

GenZ: Side hustle Generation

Gen Z has embraced the side hustle culture more than any other generation.

• 70% of Gen Z have a side hustle, significantly higher than the 50% of millennials and 40% of Gen X who also have side hustles.

• The primary reason Gen Z is taking on side hustles is financial necessity - around 70% of Gen Z side hustlers are doing so to cover debts or expenses, as traditional employment is not sufficient to meet their financial needs.

• Gen Z side hustlers are also dedicating a significant amount of time to their side hustles, with 34% spending over 20 hours per week on their side gig. This suggests side hustles are becoming more like part-time or even full-time jobs for many in Gen Z.

• Looking ahead, 70% of Gen Z reported they are looking for a side hustle, and 64% plan to "monetize a project on social media" in the next year, further demonstrating the prevalence of side hustles in this generation.

This is a big trend, which taps into several economies:

Creator Economy, Freelancing, eCommerce and Online Tutoring. Just look at stats below on growth:

• Approximately 1.57 billion people in the global workforce are freelancers.

• Worldwide, the total freelance platform market is estimated to be worth $3.39 billion.

• Last year annual earnings by US freelancers grew by $100 million, now totaling $1.3 trillion.

GenX and Millenials: Ageism is coming

The recent wave of tech layoffs has exacerbated concerns about ageism, as older workers may be disproportionately impacted. Older workers often take longer to find new jobs, as they may be perceived as less adaptable to new technologies or unwilling to accept lower salaries. This kind of bias is hard to fight, with the only cures being strict goals and rules for:

• Skill-based hiring

• Diversity & Inclusion

Now the question is also: if ATS are biased and do automatic screening for this, then who’s to save older professionals from this fate?

Full-transparency in corporate culture and career decisions

All of these dynamics are not new. However, GenZ’s approach to over-sharing is, and it’s lifted the veil on corporate culture and dynamics. I’ve written extensively about how all of this is becoming a new truth on this article: How TikTok is unveiling corporate culture

TLDR; More Layoff are coming until interest rates and companies are healthy again - but the trust with employees is broken

In summary, layoffs and outsourcing decisions have a ripple effect. They directly impact employees through job losses and emotional strain, while also influencing the broader economy by reflecting industry trends and potentially impacting job markets in different regions.

One example? Higher uncertainty at companies (and trust in decision making) will get the best employees looking for side-hustles/safety nets, which on one hand could lead to less loyalty - whilst potentially increasing the value of those employees at the same time (growing entrepreneurial, technical skills and more).

We have talked in a previous issue with how GenZ is considering their trust ‘broken’ with their employers, and this will be tough to regain.

Broadly speaking, the paradox is that it seems that short-term focus is the only interest right now, but at the same time huge investments in AI are being made with a lot of doubts on monetization capabilities and dubious feature / product releases (think of Rabbit and Humane Pin - hundreds of millions of dollars going down the drain just after a 5 minute product review).