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The recent wave of tech layoffs

Context: Technology giants Alphabet, Amazon, Meta, and Microsoft have announced the slashing of thousands from their workforce in the last couple of months.

Who has made layoffs?

• In 2022, the tech sector shed more than 1,50,000 employees, with several more job cuts (over 40,000) being announced since the start of the 2023.
• Facebook-owner Meta Platforms Inc. announced in November last year that it cut more than 11,000 jobs or 13% of its workforce. The mass layoffs were the first of their kind in Meta’s 18 years of operation.
• The Bill Gates-founded tech corporation, Microsoft headquartered in Washington announced that it would cut 10,000 jobs or less than 5% of its headcount.
• In early January, Amazon cut 18,000 jobs or 6% of its workforce in company-wide layoffs.
• Alphabet, the parent company of Google, said it would be cutting 12,000 jobs or 6% of its workforce.

Reason for the layoff?

• The advent of the coronavirus pandemic brought along rapid growth for the tech sector as work became increasingly remote, e-commerce grew amid lockdowns across the world, and housebound people spent more and more time online.
• Riding on the accelerating growth, Big Tech companies and even some small ones went on a hiring spree from the start of the pandemic.
  • Amazon’s headcount increased from 7,98,000 in 2019 to 15,44,000 in 2022, before the recent layoffs, doubling its employee base.
  • During the same period, Microsoft went from 1,44,000 employees to 2,21,000.
  • Mark Zuckerberg’s Meta more than doubled its headcount, from close to 45,000 to over 87,000.
• Big tech companies are now rightsizing their growth, instead of downsizing.
• Tech companies who hired aggressively in the pandemic, probably envisioning rapid growth to be the new normal, are now trying to shrink headcounts back to where they would have been if not for the hyper-growth offered by the pandemic.
• Meta CEO, Mr. Zuckerberg stated that he was wrong to assess that revenue gains during that period were permanent acceleration.

Impact on India Professionals

• As per reports between 30% to 40% of those laid off are Indian IT professionals, a significant number of whom are on H-1B and L1 visas.
• The H-1B visa is a non-immigrant visa that allows U.S. companies to employ foreign workers in special occupations that require theoretical or technical expertise.
• Technology companies depend on it to hire tens of thousands of employees each year from countries like India and China.
• A sizeable number of them are now scrambling for options to stay in the U.S. in order to find a new job before their work visas expire.

Do the layoffs signify trouble for the tech industry?

• Growth has indeed slowed down from pandemic levels, as pointed out by the CEOs of these companies.
• Analysts also project that the five Big Tech companies, including Apple, are headed to report dismal profits for the October to December (2022)
• A Reuters analysis states that Amazon is expected to report that earnings fell 38% and that revenue growth is at its slowest pace in more than 22 years.
• Nonetheless, these tech companies, still remain huge and profitable. Microsoft reported a more than $16 billion profit in the quarter ending December 2022, compared to a profit of about $11.6 billion in the same period in 2019.
• Meta, while reporting a 52% decline from a year earlier, earned a profit of $4.4 billion in the quarter ending September 2022.