From Great Resignation to Great Layoff, an increasingly worrying trend in the tech sector?
- Around 17,000 tech workers were laid off in May alone, raising more concerns on the industry that has been typically insulated from a troubled economy for several years.
- Even startups in Indonesia and India have been downsizing, citing economic slowdown.
It felt like it was just yesterday when resignations were rolling in at record rates around the world. Both the numbers of employees leaving and the rate of hiring across the board were soaring. The period, known as ‘the great resignation’, was mainly fueled by a rush of new jobs that were strengthening the labor market, offering workers an abundance of choice.
While that may still be the case for many industries, the tech sector at this point, seems to be painting a whole different picture. Several large tech companies, including those in Southeast Asia, have either downsized or slowed down hiring — or even both. Basically, rampant inflation, coupled with fear of stagflation and recession, has led to a convulsive shift from hiring binge during the last two years to belt-tightening now.
Why is a ‘great layoff’ in tech worrying?
As it is, tech companies are often viewed as a bellwether for the broader economy. Investors in tech need a relatively high risk tolerance, as these companies, especially startups, can take a long time to turn a profit. Companies in tech are often willing to forgo profitability for growth, when the economy is expanding.
But that has not been the case lately with supply-chain interruptions, the war in Ukraine, ailing stock markets and other red-alert economic factors. It has gotten pretty tricky to a point that Tesla chief executive Elon Musk telling his employees he has a “super bad feeling” about the economy.
What is more worrying is the fact that tech has benefited immensely from the roaring bull market of the past decade, with soaring valuations enriching not just owners and investors but hundreds of thousands of employees who were paid in stock on top of their regular salaries.
It turned into a ‘great layoff’ last month, when firing “exploded“, according to Challenger. To be precise In May, job cut announcements in tech were 10 times the number in the first four months of the year, Challenger calculated. Precisely, according to layoff tracker Layoffs.fyi,17,000 tech workers laid off in May alone, raising more concerns on the industry that has been typically insulated from a troubled economy for several years.
Companies that have laid off, slowed down hiring
The most recent was crypto giant Coinbase, laying off about 1,100 employees in response to a volatile crypto market. According to Bloomberg, Coinbase had hired aggressively in recent years, with its workforce ballooning by about 1,200 employees this year. Now, the company even plans to reduce its workforce by 18% after coming out of a long winter in which crypto value hemorrhaged.
CEO Brian Armstrong warned that “we appear to be entering a recession after a 10-plus year economic boom.” He admitted that the publicly traded company, which has a market value of more than US$13 billion, “grew too quickly” in 2021 as it scaled up to take advantage of the crypto craze. The move by Coinbase came a day after cryptocurrency company BlockFi, which had grown nearly sixfold in 2021, announced it was laying off about 250 people.
Tech giants like PayPal and Meta have also been on the ‘great layoff’ bandwagon with the payments giant letting go dozens of employees from its San Jose headquarters in the US. Meta and Twitter on the other hand, have publicly announced hiring freezes, while Snap, the parent company of Snapchat, confirmed it is slowing hiring as it misses revenue targets.
Tesla which employs over 100,000 staff will also be cutting down its staff. In Singapore, the car company has already laid off its senior staff, with Elon Musk even telling employees to return to work in office or work elsewhere.
Looking into Southeast Asia, e-commerce giant arm Shopee announced last week that it is laying off some employees in its food delivery ShopeeFood and online payment ShopeePay teams. But it’s not only regional operations that would feel the brunt, in fact Shopee said it will also cut staff in Mexico, Argentina and Chile, as well as a cross-border team supporting the Spanish market, according to a company memo seen by CNA.
The Singapore-based Sea Limited plans to also close its early-stage pilot in Spain, after announcing plans to launch online sales in the country last October. Even in Jakarta, announcements started to tumble out in the last week of May signaling the beginning of tech-company layoffs. Zenius, an edtech platform, abruptly laid off over 200 employees, while fast-growing e-wallet LinkAja also fired “hundreds.” On their heels came a workforce cut by JD.id, an upstart e-commerce platform backed by Tencent’s JD.com.
For this year so far, tech companies worldwide have laid off a total of 35,000 workers, according to Layoffs.fyi. LinkedIn News editor Andrew Murfett in a blog posting said, “This is the most significant number of lost jobs in the sector since May 2020, at the height of the pandemic. Much of the tumult has occurred in venture capital-backed firms as investors abandon risky bets and seek immediate returns.”
Great resignation vs great layoff: Job tracker shows it’s not all gloom and doom
No doubt there is a lot of anxiety right about the labor market at this point but job tracking data is showing no notable drop-off just yet. The networking platform’s June Workforce report that focuses on the US market shows that hiring in the tech sector increased by 2.1% month-to-month in May, which is not different from normal fluctuations in the field. Hiring remains steady, per the report, up 17.5% since last year.
At the same time, many industries are still experiencing a skills shortage especially in tech related roles. Most of these companies lost employees during the great resignation and can now look to benefit from the great layoff. The only question now is, are employees willing to compromise their working demands to secure a job?
When the great resignation took place, most employees left their jobs due to work preferences apart from better opportunities. Despite remote and hybrid work seemingly the ideal employment preferred by many, the reality is, if the great layoff gets any worse, employees may just have to go for whichever job that’s available to them in the future.
With that said, the great resignation and great layoff is going to have a huge impact on both employers and employees.
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