Over 85,000 workers in tech have been laid off so far in 2023. So, what does this mean for the industry – and the wider economy?
Last August, the Australian Government and the Tech Council of Australia made headlines for announcing that by 2030, Australia would create 1.2 million tech jobs.
As of then, tech was equivalent to Australia’s seventh largest employer and those extra people would be needed to join the workforce to meet projected growth.
“Australia will need an additional 650,000 tech workers by 2030 to meet the 2030 target,” said Minister for Industry and Science Ed Husic at the time.
Fast-forward to 2023.
As of today, around 85,000 workers in tech have been made redundant in 2023, according to the headcount live tracker at Layoffs.fyi.
The numbers are even higher on tracker website trueup.io, at over 100,000. Whichever is closer to the mark, tech giants seem to be responsible for much of the larger numbers.
Software company Microsoft, Google’s parent company Alphabet, Mark Zuckerberg’s Meta, IBM, Salesforce and Amazon have been among those cutting workers loose.
Despite massive success during COVID-induced lockdowns, subscription companies are not exempt.
Last week, Spotify laid off around 600 employees, and even Netflix has laid off smaller numbers. E-commerce company PayPal laid off 7 per cent of its workforce just a few days ago.
The workers have already taken to online platforms like TikTok, Reddit, and – not unexpectedly – LinkedIn to vent frustration and discuss possible restructuring.
While some companies, such as Apple, might have so far avoided these recent layoffs, it’s fair to say that tech companies and workers – in Silicon Valley and beyond – have been shaken up.
It all paints a seemingly grim picture for your future of work as a techie, flying in the face of a predicted growth in tech jobs.
Or does it?
According to Professor Barney Tan, Head of School of Information Systems and Technology Management at UNSW Business School, in Australia we shouldn’t be seeing this in a downturn in the demand for tech workers, but more of a realignment in where they go.
“From a longer-term perspective, the fundamentals of the tech sector needing more workers remain sound,” Professor Tan explains.
“This is because we are likely to see the tech talent from these large tech firms move to other areas.”
So where will all the tech workers go, and how will this big shake up impact Australians who subscribe to services from these big tech companies? And are these layoffs a foreshadowing of an impending recession?
Professor Tan explains.
So, why are the tech layoffs happening?
Professor Barney Tan: I think the current job cuts by the big tech companies are a bit of a knee-jerk reaction. Most of those that have done the big layoffs are companies that have experienced phenomenal growth during COVID-19, which led to an increase in the demand for online services.
Today, a confluence of number of factors is behind the current situation, which includes over-hiring during the pandemic, a slowdown in demand for their services post-COVID, rising inflation and interest rates, and an uncertain economic landscape where downturns are becoming more possible.
Does a predicted increased use of AI from areas such as ChatGPT have anything to do with them?
Professor Barney Tan: To some extent, yes.
But the generative AI tools we are seeing are still not sophisticated enough that they can be used unsupervised, but at the same time, most of the workers who are laid off are HR personnel whose tasks are becoming increasingly automated through AI.
Do we know what types of employees are being laid off?
Professor Barney Tan: Funnily enough, it is not so much the technical staff who are being laid off.
A report by 365 Data Science found that many of the workers affected are actually HR personnel, accounting for 28 per cent of total layoffs. This suggests both that many platforms can now automate routine HR procedures, and that these big companies could be looking to reduce recruitment.
We’ve been hearing for years that we need workers to fill tech jobs. How does that make sense when there were such big layoffs?
Professor Barney Tan: As I said, this principle still makes sense.
Many younger people may have been drawn to the larger tech firms in the past because they want to work at the cutting edge of innovation. But there are a good number of innovations that are actually driven by smaller tech start-ups, which have traditionally found it hard to compete for talent as there are constraints on the material and pay incentives they can offer.
At the same time, with all the innovations that have emerged in recent years, traditional businesses – for example, companies that have never defined themselves as ‘tech’ companies – also need talent to harness those innovations to enhance what they do.
These traditional businesses have also typically struggled to attract tech talent.
How do you think mass layoffs will impact tech workers and tech industry?
Professor Barney Tan: I think the main implication is that there is going to be a redistribution of tech talent. The large tech companies have been the employers of choice, and these companies had the resources to over-hire during the pandemic when demand for their services are through the roof … while everyone else was finding it difficult to attract tech talent.
The need for tech talent has not gone away, so it is just a matter of the talent pool trickling down to other organisations like start-ups and businesses that might have considered themselves non-tech, but nonetheless, need tech workers.
What does this mean for those looking to get into the tech sector, like students?
Professor Barney Tan: As I said, it is not that the market for tech talents is shrinking, but just a period of adjustment where those organizations that were more attractive to tech talents and had the resources to hire almost indiscriminately during a period of boom, are now finding that they have to let them go.
My message to anyone studying a tech-related degree like computer science, data analytics or information systems would be don’t panic.
The demand for tech talent still far outstrips the supply and while there is going to be an adjustment period, it is going to be alright.
Your tech qualifications have not suddenly become worthless. In fact, they are likely to become all the more valuable because as our tech tools become more sophisticated, the more we will need people who can harness their full potential.
How will the layoffs impact the Australian tech sector?
Professor Barney Tan: The impact on Australia of all this is likely to be minimal because we still have many businesses that have been crying out for tech talent.
If anything, this global development may see a greater availability of tech talent for Australia as the laid off employees displaced from the US, Europe and the UK may now be forced to move.
So, tech workers in Australia shouldn’t be too worried about the job market just yet?
Professor Barney Tan: No, they shouldn’t.
There will be some spillover and there are businesses like online food delivery platforms that may see the demand for their services evaporate, but with tech trends such as the advances we are seeing in AI, the emergence of new technology-enabled business models, and increased cybersecurity threats globally mean that the demand for tech talent will remain high.
Companies like Amazon were among those cutting jobs. Are we going to see a rise in prices for goods like streaming subscription services?
Professor Barney Tan: We are already seeing the prices for goods and services creep up, but this is likely due to inflation rather than the tech layoffs.
The tech layoffs are primarily a cost-cutting measure, but it could also mean that with fewer employees, the capacity for providing services and the variety of offerings for consumers may be reduced.
Do moves like this signal an impending recession? Is it likely to hit other industries this hard?
Professor Barney Tan: While the layoffs are not a definite sign of an impending recession, it could be a sign that the tech companies are anticipating reduced growth against the backdrop of an uncertain economic future.
In other words, this is the tech companies’ perception of what is likely to come and not so much the indication of an inescapable reality.
The development will not be restricted only to the tech sector unfortunately. We are likely to see similar developments in industries that have seen a similar spike in demand during COVID.
Written by Kate Bettes.
