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              WHY ARE TECH LAYOFFS HAPPENING?

 

INTRODUCTION

With the technology sector continuingly growing, several people are being laid off from their tech jobs. Twitch has cut 35% of its staff, which is around 500 employees. Google and Amazon have laid off hundreds of employees already. The massive layoffs have set the technology workforce to pre-pandemic levels. The layoffs in the technology sector were primarily caused by weak consumer demand, inflation, and a recruitment spree during the pandemic. However, these big tech companies have made sustainable profits, especially during the pandemic. 

Employee Pay

Paying employees is one of the tech companies’ biggest expenses, and that has increased due to inflation. Services had gone through increases in pricing with living costs skyrocketing. Additionally, many of these tech companies like Meta and Google rely on advertising to maximize their revenues. To help maximize the companies’ profits, company executives had to look through laying off workers to continue to enhance their advertising. 

Overhiring During the Pandemic

During the COVID-19 pandemic, many people used the Internet much more. People started working remotely, online shopping, took classes online, and streamed shows and movies. The increasing use of technology during these past years have allowed big tech companies to make massive profits. With the massive profits they made, these companies also increased their workforce by hiring more people in the technology sector to keep up with the demand. With the pandemic ending, people have started spending more time outside and have reduced their time on their electronic devices. This has also been a factor in contributing to layoffs in the technology industry.

Investor pressure 

With investors seeking to maximize their profits, some of these investors have called on companies to cut their workforce to help combat low profit growth while simultaneously cutting expenses. For example, an activist investor helped pressure VF Corp. to lay off hundreds of its employees and reduce its expenses to help combat the downward trends in sales as VF reported a net loss of approximately four-hundred fifty million dollars. 

CONCLUSION

It is clear that the pandemic was a great economic opportunity for technology companies to increase their profits and workforce. After the pandemic ended, the technology sector has faced new challenges in maximizing their profits. Inflation, overhiring, and pressure from investors have all played a vital influence in causing 

SOURCES

https://www.npr.org/2024/01/28/1227326215/nearly-25-000-tech-workers-laid-off-in-the-first-weeks-of-2024-whats-going-on

https://www.techtarget.com/whatis/feature/Tech-sector-layoffs-explained-What-you-need-to-know#:~:text=Technology%20companies%20saw%20price%20increases,of%20the%20largest%20company%20expenses.

https://www.retailtouchpoints.com/topics/omnichannel-alignment/responding-to-activist-investor-pressure-vf-lays-off-corporate-employee

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