The Tech Industry Begins Layoffs and Hiring Freezes
- While many industries are aggressively looking to hire employees, the tech sector is experiencing hiring freezes and layoffs.
- The tech industry has experienced rapid growth over the past few years, but venture capitalists are hesitant to invest due to an expected economic downturn, thus slowing down growth.
- As more people are being laid off, the once low unemployment rate will most likely rise again.
Since it seems that the worst days of the pandemic are behind us, the United States economy has continued to show signs of opening back up. However, although the majority of industries are aggressively hiring, there is one major sector that is going in the opposite direction of everyone else–the technology industry. The once-booming industry has begun laying off people or going through a hiring freeze.
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Why the Tech Industry Is Beginning Layoffs
It may seem weird that the technology industry is going through high-volume layoffs, unlike most other sectors during current times, since tech is part of our everyday lives. Not to mention, technology companies have experienced rapid growth over the past few years. The rapid growth came along with high valuations and high funding rounds, which also led to the hiring of many new employees. However, as the threat of an economic downtown takes center stage, tech companies, especially those that have inflated valuations, are being forced to cut costs, leading to layoffs in an attempt for tech companies to survive.
One of the main ways tech companies continue growing is by receiving funding from investors, including angel investors and venture capitalists. Over the past two years, venture capitalists have been eager to help out and give money to tech companies and fund their growth. However, with the Federal Reserve increasing interest rates to slow down spending and reduce inflation, venture capitalists have become reluctant to invest in tech companies, which has played a significant role in the slowed growth of the tech industry.
As a result, many companies have decided to reduce their workforce. Affecting not just early-stage startups, some leading tech companies have announced that they are instigating a hiring freeze and laying off employees, including Meta, Instacart, and Netflix.
Netflix, the streaming service giant, reported a less than stellar Q1 2022 and missed its earnings call, resulting in a drop in investor confidence. Before releasing its quarterly financial statements, Netflix assumed it would gain subscribers, as it had done so in the past decade. Unfortunately, due to the increased competition within the streaming industry, Netflix lost subscribers, resulting in lower revenue.
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A Netflix spokesperson stated, “As we explained on earnings, our slowing revenue growth means we are also having to slow our cost growth as a company.” As a result and as a means of cutting costs, Netflix has begun to partake in laying off employees.
Which Employees the Tech Industry is Laying Off
Although it is not definitive which employees will be laid off, hiring experts believe that employees working remotely are at a higher risk of being laid off. Even though remote work became dominant and preferred by many due to the pandemic, hiring experts have stated that many managers still prefer employees who work in person rather than those who are remote.
However, this does not mean that all remote employees will be laid off. After all, many companies have decided to stay remote-based and no longer have a central office. More so, managers care about those who have the best merit, and if a remote employee works better than an in-person worker, they are more likely to be retained. But, if a remote and in-person employee are nearly identical and the employer is hybrid-based, then the in-person worker is more likely to be kept over the remote worker.
Impacts of Tech Industry Beginning Layoffs
As many major companies have begun laying off workers, the unemployment rate could potentially rise if these former employees struggle to find new jobs. Although the number of jobs available is at an all-time high, some former tech employees may be forced to work in a different sector until the downsizing period in the tech sector is over.
The Money Wrap-Up
It is too early to determine how long this hiring freeze and laying off process will continue. However, going through a period of the market correcting itself is nothing new. Hopefully, the hiring freeze will be removed soon, allowing a significant portion of the tech workforce to return to their jobs, maintain their current position, or find a new tech-based team to join.