Excess Exuberance, Not ‘Bossism’ Behind Rash of Tech Layoffs

Tech layoffs have been grabbing headlines recently, for good reason.

Google’s parent company, Alphabet, has laid off 12,000, about 12% of its workforce. Facebook’s parent Meta has chopped 11,000 workers from the rolls, and IBM slashed 3,900 employees, 1.5% of its global workforce.

All told, 1,045 tech companies laid off 160,097 workers in 2022, and this year, 344 tech firms have already issued pink slips to 103,767 workers, according to Layoffs.fyi.

Concern over an impending recession — despite unemployment reaching a 50-year low of 3.4% — is contributing to the layoff frenzy. So is a hiring hangover from the pandemic. Yet another factor, according to some job market watchers, is the “Great Reboot.”

According to Business Insider, the Great Reboot is management’s answer to the Great Resignation and “quiet quitting.” It’s making strategic decisions, including layoffs and cuts in salaries and perks, to regain power lost to employees during the pandemic.

Pull-Back, Not Bossism

The Great Reboot has its doubters, though.

“What looks like ‘bossism’ or a perverse crackdown by tech management to put the help in its place is much more likely a pull-back from way over-hiring at the beginning of the pandemic,” observed Mark Muro, a senior fellow in the Brookings Metropolitan Policy Program at The Brookings Institution, a nonprofit public policy organization in Washington, D.C.

“Tech firms got way over their skis as the world piled onto digital platforms and now needs to pull back,” Muro told TechNewsWorld.

He explained that the tech sector is experiencing a genuine temporary recession and is being forced to correct for past errors on the hiring front. Slowing tech sales and higher interest rates have, at least for the moment, blown the whistle on unlimited hiring.

“The firms are facing real market problems — not just trying to put workers in their place,” Muro observed, “though the time of unlimited perks and spiraling pay is for sure on hold.”

“It’s also important to recognize that Big Tech is its own world,” he added. “Most of the rest of the economy is still contending with tight labor markets where workers still have a lot of leverage.”

Conspicuous by Its Absence

However, as Gartner analyst Wade McDaniel pointed out in a recent blog, some companies have been better at managing the pandemic hangover than others.

“Many of the companies mentioned in the press say that they went on a spending spree or over-invested in talent during the height of the pandemic,” he wrote. “Others say they are responding to shifts in their business model.”

“But one company is notably missing from the layoff press coverage: Apple,” he continued. “They experienced high growth during the pandemic but are not currently laying off staff even though revenue was down in Q4.”

McDaniel noted that Apple grew its workforce by about 20% over the past three years, while Microsoft, at 50%, and Alphabet, at 57%, took much more aggressive approaches to staffing.

“To be sure, economic and market uncertainty are contributors to these reductions,” he wrote, “but in the end, many firms will retain a larger staff after the layoffs when compared to just 12 months ago.”

A Case of Over-Exuberance

Robert D. Atkinson, president of the Information Technology and Innovation Foundation, a research and public policy organization in Washington, D.C., called the idea that companies would lay off workers to recoup control lost during the pandemic “far-fetched.”

“What happened to the tech companies was they were a little over-exuberant in responding to the pandemic,” Atkinson told TechNewsWorld.

“A lot of the demand for IT during the pandemic was somewhat temporary,” he explained. “When demand returned, it was lower than the companies expected.” “They overshot,” he continued. “I don’t buy the idea that they’re laying off workers whom they could use productively now so they could send a message to their workforce.”

“You have workers for a reason,” he added. “If you have more workers than you need for your workload, you really only have one choice, and that’s to downsize.”

Post-Pandemic Changes

Atkinson, though, does see a post-pandemic shift in the tech sector.

“Are there going to be those frothy conditions going forward with huge signing bonuses and big salaries? I doubt it,” he said. “I think we’re at the end of that era for the tech labor market.”

He acknowledged, however, that there are always certain skill sets that are going to be in high demand or low supply. “You’re always going to pay for that superstar,” he noted. “That’s not going to go away. It’s just not going to reap the kind of premiums it has in the past.”

The most significant change in tech will be how it treats cost, he continued.

“Prior to this, cost wasn’t a principal constraint. Talent was their principal constraint,” he said. “Now they’re moving into a world where they can’t be indifferent to cost.”

“They were in a world where they had so much money they wanted to keep hiring and keep hiring the best,” he continued. “Now they’re going to focus a lot more on cost containment than they were.”

“That could lead them to make more new hires right out of college because you pay less for someone with that level of experience than competing for someone at another company with 15 years of experience,” he added.

Cybersecurity a Safe Haven for Employment

When an industry starts tightening its belt, there are always niches that seem to evade the trend. With technology, such a niche is cybersecurity.

“In cybersecurity, we’re seeing relative insulation from recessionary impacts,” observed Clar Rosso, CEO of (ISC)², an organization in Clearwater, Fla., that certifies cybersecurity professionals.

“In the cybersecurity space, we’re seeing robust plans to hire,” Rosso told TechNewsWorld.

An example of tech companies reasserting their control of workers is the elimination of work-from-home opportunities for workers. That’s not the case among cybersecurity pros, she asserted.

Rosso cited numbers from her organization’s 2022 workforce study that found 55% of cybersecurity professionals are either working remotely or have the flexibility to choose where they work, compared to 23% before the pandemic.

“What we’ve seen in the cybersecurity space is when employers force people back into the office, a lot of people will move to a new job where they don’t have to commute to work every day,” she said.

Rosso added that organizations seem to have a greater understanding now than before the pandemic of the value of cybersecurity pros.

“Because they are in such high demand, they’re not people you’re going to get rid of lightly,” she noted.

Rosso had this message for IT workers cut from tech companies: “Come over to cybersecurity, especially if you have deep technical skills. We have over three million open jobs for you.”