The Real Reasons For Big Tech Layoffs At Google, Microsoft, Meta, and Amazon

Between them, some of the world’s biggest tech companies have collectively laid off more than 150,000 workers in recent months. The businesses involved have put forward a variety of reasons for why this was necessary, which mostly come down to a need to reduce costs as economic growth slows down around the world.

In truth, it isn’t likely to be because the companies involved need money. Microsoft, which is reported to have laid off around 10,000 employees, practically simultaneously announced that it plans to invest $10 billion in OpenAI, the creators of the viral application ChatGPT. It seems likely that there is a business reason at the heart of the decision to invest a sum that would equate to $1 million per laid-off employee in an AI company.

Likewise, Google's parent company Alphabet announced plans to reduce its global headcount by 12,000 – a cut of around six percent. CEO Sundar Pichai has previously described AI as the most transformational technology of all time, and in making the layoffs, stated that the strategy will be to “direct our talent and capital to our highest priorities.” It’s widely thought that Google is working on its own AI-powered answer to ChatGPT that will be announced soon.

Together, four of the biggest tech companies – Meta, Alphabet, Amazon, and Microsoft – have cut 50,000 jobs. Meanwhile, Twitter’s incoming new boss, Elon Musk, is said to have fired half of the company’s employees when he took over at the end of last year.

So, what is the true reason for these mass cuts that have left tens of thousands (80% of them in the US) out of work? This was what data experts at 365 Data Science attempted to get to the bottom of when they decided to run their own analysis of the figures.

Some of the findings were perhaps not that surprising. It’s known that tech companies – buoyed by record revenues - undertook a hiring spree during the Covid-19 pandemic. Salaries hit record levels as competition raged for the top talent, and the media was full of stories of lavish perks. So, it’s not a shock to find that the median time a recently laid-off employee has been in their role is roughly two years. This could suggest that, in some ways, these cuts represent a winding-back of hiring policies put in place since the pandemic.

More surprising though, was the fact that the median level of experience held by those who were let go is 11.5 years. So, it's not necessarily true that these are all junior workers with little experience who could be quickly replaced or possibly even have their roles automated. One possible reason for this statistic could be that longer-serving employees tend to receive higher salaries, and cutting them could help businesses meet their financial targets.

However, it is interesting to note that the roles and job functions most affected were within HR, which accounted for 28 percent of all layoffs. There are two possible reasons for this – firstly, it follows that if companies are laying off staff, they will also be cutting back on recruitment, and less recruitment means less need for HR staff.

A second, though perhaps just as relevant reason, however, is that HR is an area where some functions are being replaced by automation. Platforms already exist that aim to automate routine tasks related to interviewing and onboarding new hires, such as checking references, verifying identities, and carrying out health and safety assessments. In recent years, it’s even been reported that companies such as Amazon have used AI to identify low-performing staff and then fire them.

We also get some insight into how the roles that were affected differed between each company. While HR and talent sourcing were most affected at Microsoft and Meta, at Google and Twitter, it was software engineers who took the brunt of the cuts.

The data collected by 365 Data Science also shows that a narrow majority of the staff who were let go (56 percent) were female. This is worrying, given that the tech industry has spent much of the last decade attempting to address the gender imbalance already present within the field – particularly within technical and engineering roles. It doesn’t exactly send out a great message to potential new female hires that, as well as a pay gap and a lower likelihood of progressing into senior roles, they will have to content with a greater chance of being let go.

Finally, one more worrying statistic that jumped out at me from the report was the fact that only 10 percent of those laid off have thus far listed a new job on their LinkedIn profiles. Of course, it’s too early to tell whether this is likely to transition into long-term unemployment – many may simply be enjoying a break before jumping into job-hunting. Or, indeed may simply not have bothered to update their profiles yet. But monitoring how this statistic develops over coming months should give some interesting insights into whether or not it is still easy for skilled tech workers to move between jobs. It’s perfectly possible that a substantial number may choose to head into self-employment or the freelance gig economy.

So, is it the case that the tech giants simply expanded too far, too quickly? Or is it that innovations in AI and automation have created a situation where the fastest way to save money is to replace people with machines? In truth, it’s likely to be a little of both. None of the companies have specified automation as a driving force behind the moves, but given the job roles affected and reading between the lines, it’s tempting to draw the conclusion that it is a contributing factor.