Big tech is laying off employees by the thousands. Why? and how worried should we be?

Tech companies are always in the news, usually touting the next big thing. However, the tech news cycle lately hasn’t been dominated by the latest gadget or innovation. Instead, abbreviations are in the headings.

Over the past year, more than 70,000 people globally have been laid off by major technology companies – and that’s not including the downstream effect of contractors (and other organizations) losing business as budgets tighten.

What exactly caused this massive upheaval? And what does that mean for the industry and for you? What are the damages? Since the end of the pandemic, large numbers of employees have been laid off by large technology companies, including Alphabet (12,000 employees), Amazon (18,000), Meta (11,000), Twitter (4,000), Microsoft (10,000) and Salesforce (8,000 ).

Other big names share the spotlight, including Tesla, Netflix, Robin Hood, Snap, Coinbase, and Spotify — but their cuts are significantly fewer than those mentioned above.

Importantly, these figures do not include downstream layoffs, such as ad agencies cutting staff as ad spending falls, or manufacturers downsizing as tech product orders decline – or even potential layoffs yet to come.

And let’s not forget the people who leave voluntarily because they don’t want to go into the office, hate their managers, or aren’t keen on Elon Musk’s philosophy of “hardcore work.”

The implications of all of the above will be felt in the consulting, marketing, advertising and manufacturing spaces as companies cut costs and shift them towards AI innovation.

So what’s driving the layoffs? The canary in the coal mine was reduced with ad spend and revenue. Many tech companies are funded through advertising. So while that income stream was steady (which was especially true in the pre-COVID years), so were staff costs. As advertising revenue fell last year – in part due to fears of a global recession brought on by the pandemic – layoffs were bound to follow.

Apple is one exception. It has strongly resisted headcount increases in recent years and has not had to cut staff as a result (although it is not immune to staff losses due to changes in its work-from-home policy).

What does this mean for consumers? While the headlines may be startling, the abbreviations won’t actually mean much to consumers. In general, work on technology products and services is still expanding.

Even Twitter, which many predicted was already dead, is looking to diversify its revenue streams.

However, some beloved projects like Mark Zuckerberg’s Metaverse probably won’t be developed the way their leaders originally hoped. The evidence is in the layoffs that are concentrated (at least at Amazon, Microsoft, and Meta) in these big innovation gambles taken by senior leaders.

Over the past few years, low interest rates combined with high consumption related to COVID have given leaders the confidence to invest in innovative products. Except in AI, that investment is now slowing or dead.

And what about the people who lost their jobs? Layoffs can be devastating for those affected. But who is affected in this case? For the most part, the people who lose their jobs are educated and very capable professionals. They receive benefits and support that often exceed the minimum legal requirements. Amazon, for example, has explicitly stated that its losses will be in technical staff and those who support them; not in warehouses.

Having a major tech employer on their resume will be a real asset as these people head into a more competitive job market, even if it doesn’t look like it’s going to be as heated as many feared.

What does this mean for the industry? With experienced tech professionals looking for work again, wages are likely to fall and higher levels of experience and education will be required to secure employment. These corrections in the industry are potentially a sign that it is in line with other, more established parts of the market.

The recent layoffs are attracting attention, but they won’t have much of an impact on the economy as a whole. In fact, even if Big Tech laid off 100,000 workers, it would still be a tiny fraction of the tech workforce.

The reported numbers may seem large, but they are often not reported as a share of total payroll costs or of total staffing at all. For some tech companies, they are just a small part of the huge amount of new employees initially hired during the pandemic.

Big Tech is still a big employer, and its big products will continue to influence many aspects of our lives.