Over the past few months, you’ve probably heard that tech workers at major companies like Meta, Google, Amazon and more are being laid off. Whether you work at a large corporate tech company or own a small business like a restaurant or a coffee shop, you’ve probably wondered what it means for you personally and your business.
Tech layoffs are having ripple effects beyond the tech sector — on work-from-home trends, commercial real estate and even state and local economies. With a $2 trillion impact on the economy, a tech downturn could have broad economic implications if not managed properly.
The tech industry has long viewed itself as relatively layoff-proof. But that’s starting to change. As technology evolves, automation and AI make certain jobs obsolete, and the industry shifts towards nimble acquisitions, it’s becoming harder to avoid downsizing. Combined with rising inflation rates and other macroeconomic factors, layoffs are now the norm rather than the exception for some of our most beloved companies.
One of the most common reasons for slashing staff is cost reduction — an effort to offset revenue declines. Many tech companies have revenue models that rely on advertising, and the Federal Reserve’s recent interest rate hikes are deterring consumers from spending, which lowers demand and drives down prices.
But there are other, less-obvious reasons for the upswing in layoffs. Stanford professor Jeffrey Pfeffer argues that these mass layoffs may be more about market share and copycat behavior than about actual cost-cutting. As top-performing companies announce they’re laying off massive numbers of employees, it becomes increasingly normal for smaller tech firms to follow suit, especially when doing so has a positive impact on their stock performance.