It wasn't that long ago that we went through a period that became known as the Great Resignation. During those months, many people took the risky step of changing jobs. The main reasons behind it were the big job market, the ease of the COVID-19 measures, people thinking more about where they work, not only in terms of salary but the goals and values of a company, and many more. Many resignations were handed, the numbers skyrocketed, and big and small companies were worried. Employees realize how much power they have since qualified people are not so easy to find and start having higher demands. Not only in terms of salaries but also flexible remote time, hybrid working space, benefits, and other perks that weren't as important.
The Great Resignation was also the main reason the job market never shrank. One person goes, but it opens a position for the next one. However, the question “Why did the person holding this position leave?” became common. People weren't afraid to ask the hard questions and have demands which made it hard for some companies to fill empty positions for quite a while. We saw that the Great Resignation period more or less came to its natural end when the people that wanted to change their work did it, and the job market settled. But the new period that followed surprised many — the Great Layoff. Especially in the tech sector that grew expeditiously during Corona times, we can see how the job market is now downsizing. Many companies slowed down or completely froze hiring; seeing many layoffs is not uncommon nowadays. We experienced something similar back in 2020 but mostly in other industries. The inflation, stagflation scare, and recession made many big companies rethink their hiring strategies and budgets.
Why does the Great Layoff affect mainly the tech sector?
The tech sector is usually viewed as the one that will never be in danger of economic changes. The companies in this area typically grow fast, and their profit is huge. But this is not the case anymore. Now even investors are not so willing to give their money that seems riskier and will take too long to turn a profit. The period in which growth was the most important and how much money you will spend for it and how much you would make wasn't the focus is long gone. Many events influenced the global market, which also affected the tech sector. The war in Ukraine, stock market changes, economic disasters, and many others make it hard to run your business without needing to adapt. When we look back, the tech sector is the one that benefited the most from the roaring market. Valuations were favorable for them, investors were generous and brave, hundreds of thousands of new positions were opened, and many other factors made tech companies feel invulnerable. For startups, it was easier to break through and become big players in a short period. Finding people to fill positions was easy, and people were willing to accept some part of their stock payment because they expected a considerable profit. But now, when firing rates are rising, people are starting to get worried, and for a good reason. The Great Layoff is not something that will pass in a week or two. The companies not only let people go but also slow down hiring. Slowing down hiring was the first sign that things were not going in a good direction. Employees, employers, and investors are now worried about the market's state and what they should expect next.
Companies that laid off people
Even the biggest companies are affected by the Great Layoff, so let's have a look at some of them and what happened and why.
Elon Musk has said in a couple of interviews and shared with colleagues that he has a “super bad feeling” about where the economy is heading. He also stated that the company became overstaffed in many areas and will cut off 10% of salaried workers on June 3rd. The people fired are not the ones in production because, as Tesla's owner said, they are very much needed since the demands for new cars are very high. Another change we saw that Tesla made is asking all employees to return to the office. This might be one of the reasons that the company experienced the Great Resignation as well since people came to love the home office flexibility.
The first layoffs that Netflix did were at the end of April. They fired journalists that were working for Tudum, which is the entertainment site that the company owns. By the end of June, they cut around 450 employees from the company. The reason behind this is the very low Q1 reports they presented in front of stakeholders. The costs of Netflix are pretty high because of the production of many new titles or continuation of known and loved ones, but they need to make some changes to get their spending under control. The layoffs are part of their plan to do so.
The “buy now, pay later” model became popular in recent years. Companies with Klarna made quite a lot of profit during the e-commerce spike during the pandemic. But even they have to lay off quite a lot of people. Klarna said that end of May, they let go 10% of their people. The CEO Sebastian Siemiatkowski said in a message sent to the public that they made plans for last year in “a very different world than the one we are in today,” This is why they don't need as many people as they do before.
Are you surprised to see that name here? We were a bit, and even though they didn't let go of that many people still is a sign that even the biggest names are affected. Around 80 employees were fired in the San Jose headquarters alone and some more in Chicago, Nebraska, and Arizona at the end of May. Most employees were in the risk management and operations teams, but PayPal assures people that this won't affect their security.