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So far this year, the tech industry has laid off an estimated 216,910 people — around 30% more than the total for all of 2022. And, according to Crunchbase’s Tech Layoffs Tracker, around 150,000 of those layoffs have been in the US alone.
Tech giants like Amazon, Salesforce, Meta and Microsoft are among the companies that have announced mass redundancies since the start of the year, with Google alone reportedly laying off around 12,000 employees back in January.
If you’re a tech worker concerned about layoffs and how they might affect you, you’re in the right place. In this article, we’ll discuss some of the reasons behind the layoffs happening in North America to help you understand what’s driving them. We’ll also provide our tips for ensuring your income is as secure as possible during these uncertain times.
Why are tech layoffs happening in 2023?
As of June 2023, the unemployment rate in the US is relatively low at 3.60%. And the US economy has been growing at a modest rate since Q3 2022. But, while cuts seem to have slowed down since the start of the year, tech firms from small startups to household names are still making layoffs as we head into Q3.
Here are a few of the reasons why that might be happening.
Correcting after over-hiring in 2020
After an initial period of panic in early 2020, the COVID-19 pandemic triggered a tech boom. With national lockdowns in many countries, most people were spending more time at home.
This increased their reliance on tech solutions for work, school, entertainment, shopping and more — and created unprecedented growth for the industry. Tech investment also surged during this period, growing by almost 100% between 2019 and 2021.
Many companies invested heavily in recruitment during this time, believing that the market’s upward trajectory would continue indefinitely. Amazon and Meta, for example, both almost doubled their headcounts between 2019 and 2021.
But as of January 2023, investment in the industry has plunged back to well below pre-pandemic levels. Without these cash injections — and with consumer spending on tech falling too — many organisations have been forced to make layoffs to compensate for their over-enthusiastic hiring sprees in 2020 and 2021.
A recent example of this is Niantic, the gaming company behind Pokemon Go. The company announced in June 2023 that it would be laying off around 230 employees. In a statement, Niantic’s CEO said that this was in response to the headcount increase the company had made after seeing its revenue grow during the pandemic. Now that revenue has decreased back to pre-pandemic levels, Niantic is cutting overheads by making layoffs.
Uncertain economic conditions
While the US economy has avoided the long-predicted recession for now, some economists believe that one is coming in the second half of 2023. And according to McKinsey, while consumers are now more optimistic about the economy, they’re still spending cautiously. Continuing supply chain issues, and socio-political events like the war in Ukraine are all having an effect too.
All of this is to say that the economic situation in North America — while not the worst — is still very much uncertain. And some tech companies are cutting costs by laying off staff in preparation for leaner times ahead.
The increasing use of AI technology
Don’t panic: robots are not (yet) taking over tech workers’ jobs. But there is a suggestion that AI could indirectly be responsible for some of the job cuts we’ve seen this year.
IBM CEO Arvind Krishna said back in May that the company expected to pause hiring for roles that could be done by AI over the next few years. And, just days after announcing plans to lay off 10,000 employees, Microsoft announced in January that it was making a “multibillion-dollar” investment into AI.
And there are a small but growing number of companies that are directly citing AI as the reason behind their layoffs. For example, Chegg, an educational technology company based in Delaware, revealed in June this year that it planned to cut 4% of its workforce — about 80 workers — in order to better execute its AI strategy.
Similarly, file-storage service Dropbox recently announced it was cutting around 16% of its workforce due to slowing cloud growth. The company plans to replace these employees by hiring new talent with the skills to develop AI-enabled solutions.
7 ways to protect yourself from layoffs as a tech worker
No list of tips can guarantee you protection from layoffs. However, there are certain things that you can do to both lessen the likelihood of being laid off, and to make sure it’s not a catastrophe if you are.
- Diversify and learn additional skills
The best way to minimise your chances of being laid off is to make yourself invaluable to your employer. This means ensuring your skills and knowledge are current and up to date. It also means taking initiative and learning new skills, which can make you even more valuable as an employee.
Although it’s not nice to think about, employers are often faced with decisions about who to lay off and who to keep on. You want to make sure you’re the obvious choice to keep — and building a diverse skill set is one way to do it.
It’s also worth noting that one of the drivers behind layoffs — the increased use of AI by tech companies — will also create many jobs over the next few years. Complementing your existing skills by learning to work with various AI technologies could be a smart move if you want to avoid losing your job.
- Build and maintain your professional network
When tough decisions about layoffs need to be made, people who have strong relationships with their colleagues and managers are more likely to be kept on. This means that building workplace relationships can help your chances of keeping your job.
But your professional network should also expand beyond your current employer. By making connections with other people in your industry, you’ll create a community to fall back on if you do lose your job. The more people you know (and the more people who know you), the better chance you’ll have of quickly securing a new role.
- Be flexible and adaptable
As organisations lower their headcounts and adapt their structures, many employees find that the nature of their role shifts too. And staying flexible, being willing to do things differently and even taking on new responsibilities will make you much more valuable as an employee than those who are stuck in their ways and refuse to change.
Plus, even if you are laid off, being adaptable can help you to secure new employment. Think about it: when hiring conditions are tough, companies are more likely to favour candidates who can fulfil multiple functions.
- Build your personal brand
Personal branding is the process of creating a brand identity for yourself as an individual so that you can project your values, knowledge and expertise to the world. Essentially, creating a personal brand is a way of marketing your professional skills even when you already have a job, so that you’ll have an easier time finding a new one if you need to.
In practice, it usually means posting and engaging regularly on business networking sites like LinkedIn. This allows you to build connections in your field and develop your reputation.
- Look for internal growth opportunities
Layoffs are often targeted to one department, even while others are growing. That means that you might be able to secure a different role within your organisation, even if your current department is facing redundancies.
When you’re looking for new opportunities, remember that companies usually keep on the people who are closest to the money. This means you should think about how your skills could be used to build revenue for your organisation, and look for opportunities in that area
- Set up a side hustle
According to financial services company Bankrate, 39% of Americans have a side hustle. This rises to 50% for Millennials, and 53% for Gen Z. There are a few reasons why starting a side hustle could be beneficial during these uncertain times. Most obviously, it’s a way of earning extra income, which you might want to set aside as an emergency fund in case you need it.
But starting a side hustle can also help you to learn new skills by working on a variety of different projects. You might also make connections in your industry, which helps to further build your professional network. And for many, a side hustle is the first step on the road to full-time freelancing — which could mean the end of worrying about layoffs and job insecurity once and for all.
- Look after your physical and mental health
There’s a misconception that working late nights, taking on new responsibilities, attending every meeting and generally going above and beyond is the key to keeping your job when layoffs are on the horizon. But these things only lead to one place: burnout. And the sad truth is that even after making yourself miserable, stressed and exhausted through overwork, you may well end up being laid off anyway.
Instead of going down this road, make sure you’re taking care of your own physical and mental health, even when times are hard. That way, if the worst does happen, you’ll be healthy and confident enough to secure a new job as soon as possible.
Freelancing as an alternative to traditional employment
Freelancers can’t get laid off. And, while they’re still vulnerable to changes in the market, they are generally in control of their own work and income. This means that freelancing can be a viable alternative to traditional employment.
Here are some of the advantages of being a freelancer over an employee in 2023:
- Freelancing gives you the freedom to choose your own work. In uncertain times, employees are often forced into taking on responsibilities that are unrelated to their actual job title because of redundancy fears. Freelancers, on the other hand, can refuse jobs they don’t want to do.
- Freelancers can gain new skills by working on different projects. Over time, this makes it easier for them to find work since they have a variety of skills to offer and plenty of experience to draw from. Ultimately, this makes their income more secure.
- Freelancers’ income comes from various sources. This means that they’re not reliant on any one company for their entire income. Even if one client experiences hardship and has to make cuts, the freelancer won’t lose everything.
- Freelancers are often the last to be let go. Since clients can usually end freelance contracts at any time, we often think of freelance work as insecure. But the reality is that freelancers are often kept on even after permanent employees have been laid off. This is precisely because they can be dropped at a moment’s notice — so keeping them on is less of a risk.
Get started as a freelancer
In a survey of 500 US knowledge workers from January this year, 62% said that the recent waves of layoffs have made them feel less secure committing to one employer, while 66% said they felt less trust in the stability and security of long-term employment. For 74%, the layoffs have made freelancing seem more attractive than ever before.
Is 2023 the year that you’ll launch your freelance career? Read our partner Out of Office’s guide to becoming a successful freelancer in 2023 to get started.
