Four reasons why so many tech companies are doing mass layoffs
San Francisco ChronicleDec 12, 2022
The Facts
Business software giant Salesforce on Wednesday announced it will be laying off around 8k employees, or roughly 10% of its staff, as well as cutting back on office space due to concerns surrounding the economy.
In a letter to employees, co-CEO Marc Benioff cited the "challenging" economic environment and "customers ... taking a more measured approach to their purchasing decisions" as reasons for the cuts. He added that the company "hired too many people" ahead of the slowing economy.
The Spin
Narrative A
Although the pandemic tech boom allowed companies to increase their workforces by as much as double, recent economic woes have, unfortunately, shattered that brief market boom. The US Federal Reserve has reacted to inflation by hiking interest rates, leading to a reduction in available venture capital. Digital ad revenue is also down, and firms overhired during the pandemic, forcing Silicon Valley to downsize.
Narrative B
Layoffs are the old-school way of dealing with a recession. Nowadays, companies should instead find alternatives because social media has made everyone a workers' rights activist with a global microphone. Beyond the poor optics, companies that conduct mass layoffs have been proven to perform less well than those that avoid them because of the cost of restructuring and the low morale caused among remaining staff.
Nerd narrative
There's a 50% chance that the annual US unemployment rate will be at least 6.06% in 2027, according to the Metaculus prediction community.