Not so long ago we went through a period known as the Great Resignation. During these months, many people took the risk of changing jobs. The main reasons behind this were the large labor market, the ease of COVID-19 measures, people who thought more about their workplace, not only in terms of salary, but also the goals and values of a company, and many others. Many resignations were handed in, the numbers soared, and businesses big and small were worried. Employees realize how much power they have as qualified people are not so easy to find and start to have higher demands. Not only in terms of salaries, but also flexible remote time, hybrid workspace, perks, and other perks that weren’t as important.
The Great Resignation was also the main reason why the job market never went down. One person goes, but it opens up a position for the next one. However, the question “Why did the person in this position leave?” has become common. People weren’t afraid to ask the tough questions and have demands that made it difficult for some companies to fill vacancies for quite a while. We have seen that the period of the Great Resignation more or less ended naturally when people who wanted to change jobs did so and the labor market stabilized. But the new period that followed surprised many: the big layoff. Especially in the technology sector, which developed rapidly in times of Corona, we can see how the labor market is shrinking now. Many companies have slowed or completely frozen hiring; seeing many layoffs is not uncommon these days. We experienced something similar in 2020, but mainly in other industries. Inflation, fear of stagflation and recession have caused many large companies to rethink their hiring strategies and budgets.
Why is the big layoff primarily affecting the tech sector?
The technology sector is generally considered to be one that will never be threatened by economic changes. Companies in this field usually grow rapidly and their profits are huge. But this is no longer the case. Now, even investors are not so willing to give away their money, which seems more risky and will take too long to generate profits. Long gone are the days when growth was greatest and how much money you would spend on it and how much you would earn. Many events influenced the global market, which also affected the technology sector. The war in Ukraine, stock market changes, economic disasters and many more make it difficult to run your business without needing to adapt. Looking back, the technology sector has benefited the most from the market boom. Valuations were favorable to them, investors were generous and courageous, hundreds of thousands of new positions were opened and many other factors made technology companies invulnerable. For startups, it was easier to break through and become big players in a short period of time. Finding people to fill positions was easy and people were willing to accept part of the payment for their actions as they expected a huge profit. But now, with layoff rates rising, people are starting to worry, and for good reason. The big layoff is not something that will pass in a week or two. Not only are companies letting people go, they are also slowing down hiring. The slowdown in hiring was the first sign that things were not going in the right direction. Employees, employers and investors are now worried about the state of the market and what to expect next.
Companies that have laid off
Even the biggest companies are being hit by the big layoff, so let’s take a look at some of them and what happened and why.
Elon Musk has said in a few interviews and shared with colleagues that he has a “super bad feeling” about where the economy is headed. He also said the company was overstaffed in many areas and will cut 10% of employees on June 3. The people being laid off are not the ones in production because as the owner of Tesla said they are very much needed because the demand for new cars is very high. Another change we’ve seen Tesla make is to ask all employees to return to the office. This may be one of the reasons why the company also experienced the big quit, as people came to love the flexibility of the home office.
The first layoffs made by Netflix took place at the end of April. They fired journalists who worked for Tudum, which is the entertainment site owned by the company. At the end of June, they laid off around 450 company employees. The reason for this is the very weak first quarter reports they presented to the stakeholders. Netflix’s costs are quite high due to the production of many new titles or the continuation of known and loved ones, but they need to make some changes to control their expenses. The layoffs are part of their plan to do so.
The “buy now, pay later” model has become popular in recent years. Businesses with Klarna made a lot of profit during the peak of e-commerce during the pandemic. But even they have to lay off a lot of people. Klarna said that at the end of May they laid off 10% of their staff. CEO Sebastian Siemiatkowski said in a message to the public that they had made plans for the past year in “a very different world to the one we find ourselves in today”. That’s why they don’t need as many people as before.
Are you surprised to see this name here? We were a bit, and even if they didn’t let that many people down, it’s still a sign that even the biggest names are affected. About 80 employees were laid off at the San Jose headquarters alone and a few more in Chicago, Nebraska and Arizona at the end of May. Most of the employees were part of the risk management and operations teams, but PayPal assures people that it won’t affect their security.
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