Microsoft has once again announced a fresh round of layoffs, this time numbering 668 in the engineering, finance, and talent teams at LinkedIn. This represents about 3% of the company’s total of 20,000 staff. These layoffs are just another addition to thousands of job cuts the tech industry has been implementing across the board since the end of the pandemic boom. Other companies that have unceremoniously cut into their employee ranks include Amazon, Google’s parent company Alphabet, and Meta. In fact, the US tech industry has seen more layoffs since the beginning of the year than any other industry in the country.
LinkedIn is a hugely successful professional networking platform with around 950 million users from all around the world. The platform monetises the job ad listing services and premium subscription services it offers for users. While the user base keeps growing year on year, LinkedIn is currently experiencing a slowed ad spend on its platform as well as a subsequent slowing in recruitment. The platform also showed a 5% year-on-year increase in the fourth quarter of this year – this is a decrease from the 10% of the previous quarter.
The tech industry is currently investing heavily in AI technology, such as the hugely popular ChatGPT, with Microsoft alone announcing the laying off of 10,000 people in January. The reasons given at the time were the current advances being made in AI as well as the recession experience in most parts of the world. Microsoft invested $10 billion in OpenAi, the developer of ChatGPT in January this year. Microsoft is not alone in these investments either – Apple, Amazon and Google have all made more than significant investments in AI in the past few years. It is clear that these companies intend to play a major part in the future of AI technology in the years to come. Apple for instance is the largest spender on AI tech, spending millions of dollars every single day on development costs. The company is also reportedly building a better, and bigger language model for generative AI called Ajax. Its AI-powered assistant Siri was introduced into the market so early in the AI game that most people who were overwhelmed at the capabilities of ChatGPT barely remember that they carry AI around in their pocket every day.
Future job trends in the IT industry are likely to be biassed heavily towards AI-related job roles, security-related positions and data-focused positions. However, it is important to remember that employment opportunities in the tech/IT industry are likely to be sparse on the ground in the years to come. Despite the promise of tech giants of future employment in the AI side of things, their actions consistently prove to be contrary to these promises. In the end, the main attraction of AI technology is that it promises to replace human intervention. There are of course still some who believe that the current trends in layoffs are solely due to recessionary pressures and overhiring errors due to industry overspending.
Global economic forces are certainly part of it of course. The pandemic saw historically low interest rates across the world as governments tried to prevent a recession from taking place in their countries. The pandemic also saw investor focus shift to new trends in information technology as virtual increasingly seemed to be the way to go. This resulted in investors being led down pathways that held less rewards than they promised, such as cryptocurrency and NFTs, resulting in as much money lost as was gained. Now that interest rates are rising, investors are becoming more and more cautious about where their money is being directed, and the tech industry is feeling the pressure. This does not mean however that tech giants are exactly suffering in terms of their bottom line, only a reduction in profit growth. And of course, as mentioned, the industry’s investments in AI are only increasing.
According to reputed sources, the tech industry is actually enjoying a time of increased investor interest following the dropoff after the pandemic. The biggest technology and internet companies in the nation for example are said to churning out profits on par with the figures reported in the pandemic years. The combined earnings of the five biggest tech companies for example represent close to 25% of the total market capitalisation, with earnings projected to increase by 34% from the previous year’s average.
The reality of the layoff situation in the industry therefore is not limited to recession pressures alone.
In 2022 and 2023 alone, the global tech industry has seen more than 400,000 workers laid off. The number of layoffs means that there are more people holding the same positions for longer, effectively stifling promotional opportunities for all. The demand for tech professionals still exists in more conservative organisations such as the public sector and healthcare. However, the perks tend to be lower than what was promised by the private sector. It is difficult to expect that the people laid off can find similar employment opportunities given that other tech giants are also downsizing their labour force. The job market is also currently trending away from hiring newcomers into the industry at the entry level, instead leaning towards hiring more experienced workers in the market. This is of course an ominous sign in a market that is already struggling with oversupply issues.
A frequently ignored aspect of the layoffs in tech is the way in which immigrants and foreign workers in the US are affected. Foreign workers especially struggle to retain their sponsorships in the country after losing their jobs. Yet more prospective workers keep coming into the country, spurred by the rumour of opportunities in the industry. According to the US Citizen and Immigration Services agency, 780,000 registrations have been submitted for this year’s H-1B visa applications as of 31 July 2023. H-1B visa applications are the visa used by foreign workers to get tech jobs in the US and has an issuing cap of only 85,000 visas. These newcomers will only add to the oversupply issues in the industry.
(Theruni Liyanage)