Tech layoffs and Hiring Expectations

Are Tech Workers Recesssion-Proof?

In the past three months, top tech startups and companies have drastically reduced hiring or completely frozen it due to the current market situation and with interest rates soaring at an all-time high and tech stocks taking punishment on the market, these conditions have made high-growth startups consider trimming down their workforce or adjust their stock-based compensation packages for employees, usually their most significant selling point in attracting talent.

Recent layoff notices from Netflix, Microsoft, Twitter, Tesla, and others, have proven that these companies are not immune to the economic realities of the global market. So, in this article, we will talk about why these layoffs aren’t going anytime soon and how this will affect tech workers in the long run.

Image source: Layoffs. FYI

According to data sourced from layoffs.fyi, it shows tech companies & startups reducing their workforce in the last couple of weeks and serving as an indicator that the layoff wave in the sector started in April and saw more than 17,000 reported job losses, almost the same as in June. In the next two months, tech companies reported another 30,000 job cuts. The number of layoffs ebbed in September but remained at a high of 5,900 before skyrocketing again in November.

Officially, the corporate “reason” for tech workers being laid off is to keep the business afloat. Layoffs, besides hiring freeze are one of the practical ways of saving operational costs. A famous example is Twitter cutting off 50 per cent of its workforce totalling a whooping 3,700 workers after completing its acquisition, Elon Musk cited the company as losing over $4 million per day due to its large workforce. He, however, noted that everyone affected by the layoffs was offered 3 months of severance packages, which is 50% per cent higher than the legally required.

Here in Nigeria, tech startups haven’t been isolated from the layoff wave with Quidax, a crypto exchange laying off 25 per cent of its workforce, blaming it on the impact of the economic downturn. Kuda Bank shockingly laid off 23 of its 450-member staff. According to the company, that number represents 5 per cent of its 450 workers. While the number of layoffs by tech companies currently in Nigeria may not meet the cut of the top 10 in the world, the number of companies having a head cut is increasing by the day in the country.

These layoffs currently look like there is no hope of hiring with a shrink in job vacancies due to the economic downturn, however that doesn’t seem to be the case. There will always be a need for talent in the tech sector. There will just be fewer junior roles but due to the growing need for software and growth, they will not disappear.

“Software is eating the world” - Marc Andreesen

According to Marc Andreessen, software dependency and needs will continue to grow as we evolve as a society and look to solve harder and harder problems utilizing software and machine learning.

In conclusion, having established the necessity of layoffs for companies in the economic downturn. Studies have shown that large companies that realize operational cost savings without cutting employees while making long-term strategic investments during a recession tend to outperform once the downturn ends.