Tech layoff avalanche intensifies as businesses batten down for 2023
IBM, SAP, Google, Microsoft, Intel, Meta, Amazon, Stripe, Salesforce, Spotify, Twitter, Meta. Running the gamut of information technology, from mainframes to media and from payments to processors, job cuts in the industry have intensified as 2022 bleeds into 2023.
News that IBM and SAP have each announced a wave of layoffs is particularly saddening. IBM’s experimental quantum computing notwithstanding, the two companies’ greatest virtue is that they are ‘boring but essential’.
Big iron and its software run much of the world, but unlike platforms for photo sharing, ordering deliveries of plastic tat or for arguing on the internet, it does not occupy a lot of space in our collective psyche. Working away in the background, enterprise-grade applications are invisible to most of us, so layoffs in this sector, which is not given to irrational exuberance, cannot be dismissed as easily as one might those at a social media company belatedly deciding its permanent exponential growth projections might be… a bit optimistic.
Back when I last tackled this subject in November 2022, I wrote that the tech sector tightening, while not good news, was not a cause for immediate panic. It still isn’t. Nonetheless, it is interesting that now the floodgates are open more and more tech companies are joining the P45 party. Notably, many of the companies shedding staff are doing so just before they make their quarterly earnings calls to shareholders.
Profits of doom
Earnings likely will be down for many of these businesses. Down from new and unsustainable highs, that is. The Covid era was a bonanza for tech that created two banner years. Not only were consumers stuck at home with only a credit card and Internet connection to entertain themselves, but businesses had to rush to update outdated infrastructure to support remote working.
Today, the world looks a little different: driven by lockdown and 2020’s stimulus in the form of lowering already low interest rates, inflation has shot up and shows signs of remaining high, while the war in Ukraine injected a lot of uncertainty into both society and the markets.
Activist investors (known as ‘corporate raiders’ before they rebranded, mind you) are demanding the knife be shoved in a little deeper. Multi-billionaire and knight (I am not making this up), Christopher Hohn wrote an open letter to Google chief executive Sundar Pichai filled with faint praise for its policy of showing staff the door. The British hedge fund manager, who runs The Children’s Investment Fund Management (still not making this up), wants Google’s parent company to stop fiddling around the edges and get serious about issuing walking papers. By shedding some 20% of its workforce.
Hohn, who is far from alone among investors in demanding cuts, wrote that Google’s median salary of almost $300,000 (approximately €275,000) is high. It’s a fair point, and 300-K certainly sounds like a lot of money to me. Two things are worth pointing out, however, and do stick in the throat just a little: firstly, many of the tech employees who are first to get the boot are contractors who earn significantly less than staff. Secondly, Hohn paid himself £1 million (approx. €1.14 million) a day in 2020.
Getting back to the macroeconomic picture, if more layoffs are to come then at least central bankers will be pleased. Interest rates have been raised specifically in order to fight inflation, and with that comes job losses. Indeed, job losses are a large part of the point, though officials want a kind of Goldilocksian ‘just right’ amount of redundancies that lowers wage pressure as opposed to sparking a new Jarrow march or the spectre of bread lines being formed by the laptop classes.
Whether or not they get it is anyone’s guess, though clearly they are trying: while it is occupying the greatest amount of newsprint acreage, it is not only the tech sector that is cutting workers. In the meantime, we can expect the policy of rate rises to continue.
On an individual level, however, the current situation presents us with a contradiction: obviously high inflation is bad. But losing your job is worse. The old saw that ‘it’s a recession when your neighbour loses his job, but it’s a depression when you lose your own’ comes to mind.
At home in Ireland, employment levels remain high, and those tech workers who have been laid off can take succour from the fact that their skills and experience remain in demand. Indeed, a flood of skilled workers late of the foreign direct investment (FDI) sector could be a boon for the indigenous sector, which, despite paying well, has long complained it is unable to match the salaries offered by the Californian behemoths.
Overall, it is undeniably a grim picture, and once defined most of all by the cruellest thing of all: uncertainty. Still, there is some good news out there: long suffering workers at an Amazon warehouse in the UK have gone on strike for the first time ever. Baby steps.
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