And the culling continues!
2022 was a record year of tech layoffs. Almost 250,000 employees lost their jobs in 1,535 rounds of layoffs in the tech space, including some of the biggest names in the industry.
But if you think 2023 will get a breather, you might want to think again, because if anything, it’s heating up. There already have been 529 rounds of layoffs affecting over 150,000 workers.
The usual explanation points to the declining economy, interest rates, inflation, and over-hiring in the pandemic years. Throw in logistics problems and the war in Ukraine, and you have pretty much the standard narrative for the phenomenon.
But in this post, we go a little sideways and talk about some of the things that often go unmentioned in the discussions about tech layoffs.
# 1 Investors welcome layoffs
In early 2022, tech stocks cratered. The big investors became more than a little antsy because it was seriously impacting their portfolios. They wouldn’t want to exit at such basement prices so they started pressuring company officials to do something about the situation.
In a bid to make their investors happy, the managements of these tech giants were only too happy to oblige. And one of the ways to increase profits is by cutting down costs. That way the company keeps more of the revenue and profits go up.
And guess what: One of the fastest and surest ways of cutting down costs is with a round of layoffs. It’s much easier to pen down a memo than to actually develop a new product and a genius marketing plan that excites one’s customer base.
We’ve come to think of layoffs as a sign that the company is in serious trouble—like it had no choice but to eventually let go of employees. But there’s another way to look at it, which would explain why it seems like the companies are almost too giddy to announce that they are firing employees.
We can look at it as a way to increase stock prices. We can look at it as a way to cut costs and increase profits.
Okay, but did it work? Did the layoffs actually result in a bounce in stock prices?
Well, it did. According to Bloomberg, tech giants saw a 5.6% rise in their stock prices one month after announcing job cuts.
News items are beginning to announce how tech stocks are mounting a comeback.
It seems like it worked.
In a letter to Google CEO Sundar Pichai, hedge fund manager Christopher Hohn said that he was “encouraged to see that you are now taking some action to right size Alphabet’s cost base…” He added that it was a step in the right direction, but still comes short of what needed to be done in order to reverse the slew of hirings in the previous years. In a way, he was saying, “Yeah, do some more of that.”
Investors are glad to see layoffs.
# 2 There might be another round of layoffs…this time because of AI.
When ChatGPT gained traction in the latter part of 2022, the world woke up to the marvellous powers of artificial intelligence (AI).
ChatGPT is just one of those AI thingies. And this thing can write essays, produce blocks of code, answer Math complex problems, design a marketing program, and provide the recipe for a very delicious chicken cacciatore…all in a few seconds.
Then there’s Midjourney, an image generator that can create any photo your mind can think of. So if you want a rabbit with purple eyes and with wings on fire, you simply type “a rabbit with purple eyes and with wings on fire” and voilà!
(There are plenty more AI programs in the pipeline that will blow our minds in the next few months.)
Suddenly, jobs that required years to master were under threat. Truth is, everyone’s job is under threat—so much so that they are talking about Universal Basic Income (UBI) again.
Forbes says we are just at the beginning of “how AI will change everything.”
So there will probably be another round of tech layoffs. This time it will not be because big companies did something wrong, like growing up too fast or betting on the wrong technologies. These layoffs will come about because the tech space has done something right—so right and so wonderful it has made many tech jobs an afterthought.
But people shown the exit may be better described as the “temporarily displaced” or the “temporarily dislocated.” Because if history is any guide, every time a tech breakthrough obliterates a section of the labour force, we know that a lot more jobs and new roles are coming after it. New industries might even be born because of it.
Just as the sewing machine made manual seamstresses look inefficient, AI makes all of us look like babies. But then the sewing machine increased productivity and opened up whole industries from textile to fashion. These added to international trade. And so instead of losing a job, even the seamstress’s husband is hired by the company to transport a slew of products that suddenly were made possible.
There’s no denying that there will be displacement, and it will be painful. But imagine the new “unicorns” that will come out of this new era. Jobs that don’t even have proper names are already trickling from the seams.
# 3 Tech companies will wield another cost-cutting measure in remote work.
Earlier we talked about how layoffs became a quick and effective cost-cutting measure by companies. They shed workers because they got too fat and wanted to become lean. Guess what, when the time comes to grow again, organizations will be faced with the choice of hiring remote professionals to augment their present teams.
Technology has changed our relationship with the workplace—in that it has given us the ability to work virtually anywhere.
Today, many of the roles that involve a laptop and an internet connection are “location agnostic” and can be performed just as well in the office, at home or at a coffee bar somewhere in the Pacific. And in the age of the globalized workforce, companies are recognizing the competitive value of hiring remotely.
Remote workers present a strong value proposition to these companies. For the same level of skill (and at times, even higher), companies can hire tech professionals from other countries at a tiny fraction of what they previously paid.
The choice is similar to that faced by American manufacturing companies in the 1980s. Producing in China was significantly more cost-efficient than having it produced in the United States. It was a strategically competitive decision. If they don’t make the move, they will quickly be bested by competitors who did.
By hiring remote tech workers, companies are essentially lowering their labour costs by 70%. The pay is much lower in other countries because the cost of living is also lower. (For example, the same .5 litre bottle of Coke will cost USD 2.10 in Australia, but only USD 0.40 in the Philippines.)
Startups and smaller organizations have already gotten in on the action. The savings of hiring remote workers are too significant, and these can be ploughed back into the business.
For a start-up, or for any organization of any size really, hiring remotely has become a strategically competitive move that no one dares miss.
Remote work will be how we collaborate as a species. Companies will be made up of workers distributed across the globe. And that’s why remote work has been considered by many as the future of work.
We have a pool of highly-skilled remote professionals from graphic artists, programmers, web developers, marketing specialists, writers, customer service associates, virtual assistants etc.
Kinetic helps clients realize significant savings in labour costs without trading off work quality. We personally vet and test candidates so only the best ones get to the interviews. We also help negotiate wages and even provide you with the latest in software tools to help with oversight and management of your remote team.
Contact us if you want to explore hiring remote workers for your organization.
Kinetic Innovative Staffing has been providing hundreds of companies in the Asia Pacific, North America, the Middle East, and Europe with professionals working remotely from the Philippines since 2013. Get in touch to know more.