What do the mass tech layoffs mean for you?

They certainly aren't a good thing, but it's not armageddon

Google slashes 12k jobs.

Meta 11k.

Amazon and Microsoft 10k.

It seems like you can’t open Twitter these days without being bombarded by yet more alarming news of tech companies slashing staff. What does it mean for the tech industry? What does it mean to you?

In order to properly answer these questions, we need someone who is qualified to examine both the macroeconomic situation as well as the tech industry itself. I am not that person, but I’m going to jump in with my unqualified opinion all the same.

Firstly, this idea of this being “tech layoffs armageddon” isn’t really true. The economy as a whole is down, and The USA entered a recession in summer of 2022. Many people will tell you the USA is not in recession, but that’s because the government and press (for some reason, lol) decided to change the definition of recession. But the US is in a massive recession.

Covid, along with government response to it around the globe, crippled the economy. Many people didn’t take a hit straight away, but with the government money printer running dry, they are starting too.

All this means that whilst tech took the biggest hit, many service based businesses are also feeling the pain and laying off staff. Goldman Sachs recently announced 3,200 layoffs, and this surely means other banks will follow. From what I’ve heard (no I don’t do citations here), the non service based economy (people that make actually real stuff, not code or numbers on a screen) is doing quite well.

It started with Covid

This makes a lot of sense. During covid people will stuck at home an mainly interacted with the world virtually. Services, especially tech based services boomed during this time. Many tech stocks boomed as money the government printed in the form of stimulus checks followed into them because people could see their revenue growth. Amazon was building new warehouses. Meta was make loads of cash from their ads, fueled by people lockdown at home with little to do except browse socials and drop cash buying things online. The food / grocery delivery companies really flourished with people never leaving the house. Investment banks were also doing huge numbers. Retail investors were sat trading all day now they were working from home, with the banks taking a cut from each sale. I was working for Goldman at this time and it was a bumper year.

It’s at this point all these service based companies fucked up.

They acted like all the lockdown driven growth was normal and would go on forever. They hired and spent money accordingly. When lockdown ended it was like the music stopped and they were the ones stuck without a chair.

To cut a long story short, I think a lot of these layoffs are a correction. Companies expanded like covid cash would last forever. Now it’s gone and we are in recession, they have to scale back. This means I don’t think the cuts are an indication of the long term trajectory of the tech sector. Big tech will be hiring again in a year or two.

How will this effect tech salaries?

One of my followers on Twitter commented that all of these tech job cuts could put massive downward pressure on global tech salaries. I don’t think so. Here’s why.

The bulk of the headline grabbing layoffs seem to be at firms based in Silicon Valley. The Silicon valley job market does not significantly impact the rest of the world. It just defines the cost of tech workers in the valley. If you have a look at tech salaries anywhere else in the world: Europe, London, hell, even most of the USA, they are nothing like on the scale that tech salaries are in the Valley. I live in London and guesstimate I’d be pulling in $100k more a year if I lived in SV.

Truth is, I’ve always seen the California tech scene as a little crazy. All the biggest tech firms in the world, plus many aspiring startups, jam themselves into one very small corner of the world, aggressively competing for all the local talent.

The result is astronomical salary bills.

Yes, the salaries in SV are probably going to take a hit. The rest of the USA might see a small downward change as they don’t have to compete with $300k google salaries, but the rest of the world will see zero impact.

Globally salaries might stagnate, but that’s to be expected since most of the world is in recession.

Plot twist?

Are the layoffs more nefarious? It has been suggested in some circles of the interwebs that these layoffs may all be part of a plan. Having been harassed to let employees work from home since the pandemic, big tech has decided workers are right! They don’t need to come to the office to be productive.

The next logical progression is, “Why higher Steve for $300k in SV when you can hire Piotr in Warsaw for $60k?”.

The thinking goes that the layoffs are to get rid of US workers and replace them with cheaper remote workers around the world.

I don’t think that is what is happening here. Although this *will* start to happen (sorry, Steve, but Piotr is the better choice!) I don’t think it’s the plan for the current layoffs. These layoffs are just the result of big tech expanding too fast and spending too much money on projects which aren’t adding to bottom line. This was fine when money was easy to come by, but means layoffs now the recession is here.

Remote work will have a huge impact on job tech markets, but I don’t think it’s happening quite yet.