The biggest IT and technology companies, especially in the US, are laying off their employees with a vengeance. What are the causes of this unemployment among hundreds of thousands of workers?
After several years of strong growth, the tech giants are facing several difficulties that are pushing them to lay off tens of thousands of employees. How to explain such a decline among the world’s largest companies?
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The bleeding concerns the entire sector of web giants: 12,000 of the 187,000 employees of Alphabet, Google’s parent company, will leave their positions. Spotify, the world leader in streaming music created in Sweden, is also cutting 6% of its workforce, or nearly 600 jobs. Microsoft is to cut 10,000 jobs by the end of March, while at Meta, the parent company of Facebook, Instagram and WhatsApp, 11,000 people are to leave the company.
Same story on Twitter, Amazon, Vimeo, Salesforces… Thus, aggregating all these numbers we obtain values that will make you dizzy: even before the announcement of Alphabet, the website Layoffs.fyi listed almost 194,000 job losses in the sector in the United States since its inception of 2022.
Growing too fast
Why such a backlash? The main reason is due to the excessive expansion of this sector during the Covid crisis. “Over the past two years, we have experienced periods of spectacular growth,” explained Sundar Pichai, CEO of Alphabet. “To support and boost this growth, we have hired in a different economic context than the one we know today”. The case of Microsoft is telling: the group has gone from 163,000 employees in 2020 to 221,000 in 2022, an increase of more than a third of the workforce.
Same story at Meta: in his press release announcing the first social plan in the group’s history, Mark Zuckerberg explained that with Covid, “the world has moved online and the rise of e-commerce led to strong growth in revenue.” According to the billionaire head of the company, “many thought this phenomenon would become permanent […] I therefore took the decision to significantly increase our expenses. Unfortunately, the sequel didn’t go as planned.”
Investments without returns
These favorable conditions no longer apply in times of inflation. To slow it down, the central banks raise their key interest rates, the borrowed money must then be repaid at a higher interest rate. A way to limit spending, and thus inflation, but which makes it more difficult to finance a business and risks reducing costs for its customers. The tech giants, who can no longer invest so easily and who see their revenues falling, must therefore get rid of the employees they had recruited by betting on a continuous expansion of their activity.
Some specific decisions may also affect individual companies. After his takeover of Twitter, Elon Musk announced that he would “purge” the ranks of his employees. But the social network has lost almost all of its advertising revenue due to a loss of customer trust. As for Meta, the investment in “Metaverse”, a virtual world that Mark Zuckerberg had high hopes for, has so far turned out to be a failure, causing more than 10 billion in losses for the company alone. in 2021 according to CNBC.