Why Are Tech Companies Laying Off So Many Workers?
ForbesNov 17, 2022
On Wednesday, US multinational tech giant Amazon announced it would cut over 18K jobs — roughly 6% of its corporate workforce — in an ongoing effort to rein in costs.
In a letter to employees, CEO Andy Jassy cited the “uncertain economy” and Amazon's decision to hire “rapidly over the last several years” as reasons for the cuts, which will primarily affect staff in Amazon Stores and PXT organizations.
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 while digital ad revenue is also down. The firms that over-hired during the pandemic are now being forced to downsize.
Layoffs are the old-school way of dealing with recession. Companies should today find alternative strategies 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 more poorly than those that avoid them because of the cost of restructuring and the low morale among remaining staff.
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.