Layoffs and hiring freezes in big tech companies have been rampant in the past year. But all these have been happening amid a severe shortage of tech candidates.
Why Is This Happening?
The pandemic-led growth in hiring experienced by big tech companies has, in recent months, become an issue due to the skyrocketing inflation and escalating interest rates.
The world’s most ubiquitous tech firms have announced massive layoffs that have spurred talks about a looming recession not only in the US but the global economy as well.1
At the beginning of the year, Amazon announced layoffs of 18,000 of its cooperate employees. This is so far the biggest layoff by a tech company. Following suit was Google, who let go of 12,000 employees while Microsoft cut down its workforce by more than 10,000.
Meanwhile, Meta shed 13 percent of its workforce while the new Twitter CEO Elon Musk took the company private and streamlined its employees significantly in the process. To date, Apple is the only tech company that has not announced massive layoffs. However, it has implemented a hiring freeze in most of its tech positions, signaling that it is feeling the crunch.
Despite these mass layoffs and hiring freezes, there remains a massive candidate shortage in the tech sector. However, analysts have estimated two jobs available for every job seeker in the tech sector.
Indeed, the phenomenon of tech workers being laid off amidst a still widening shortage of tech workers has sent mixed signals to both jobseekers and tech employers. So, what is happening?
The Worst of Times, The Best of Times in Tech
The Worst of Times: Reasons Behind the Job Cuts and Hiring Freezes
Inflation and Rising Interest Rates2
The price of basic commodities in the United States hit a four-decade high of nine percent in June 2022. This figure has gone down steadily in succeeding months, registering at six percent in January 2023, becoming apparent that the rate of decrease appears to be slowing.
With the volatile inflation rate, interest rates will keep increasing to control the price rise. The most practical implication is that people get to spend less because of the rising costs. And when the purchasing power of consumers drops, they tend to spend less on the products and services offered by the tech sector.
Naturally, this causes a significant drop in revenue for tech and business in general. This is why big tech companies have become more conservative in their revenue projection for 2023 and beyond. And as revenue consolidates, big tech has resorted to streamlining costs and letting go of workers.
Pandemic-Era Overhiring
During the height of the pandemic, tech companies hired additional workforce. As people mainly stayed indoors due to mobility controls and lockdowns, remote work became mainstream, and many organizations were forced to migrate to digital platforms.
This significant dependence on technology because of remote work, consumers buying more electronic products, and availing of more digital services as they stayed home raised the demand for tech. Tech firms then hired more people to compensate for the huge demand. Many analysts call this over-hiring.
After a few years, and as the world emerged from the post-pandemic global economy, people have once again started to come out, and many have gone back to their offices or have been revisiting malls and entertainment centers for their shopping and leisure needs. The over-dependence on technology has significantly slowed.
This has resulted in a redundancy of workers in the tech sector. While companies like Apple have not performed any massive layoffs, a hiring freeze meant that it did not lack staffing to meet the current demand. Unfortunately, for other tech companies, job cuts became necessary to streamline operations, slash expenses, and maintain growth in the next few years.
The Best of Times: A Cautious Yet Positive Outlook
The hiring freezes and layoffs happening in big tech right now paint a rather lopsided picture of how tech is doing this year and the years to come. Despite the very cautious and somber outlook for 2023, there are still plenty of reasons to be optimistic about the tech sector this year.
Tech employers must learn how to recognize opportunities when they see them. For instance, the candidate shortage in tech persists to this day and projects no signs of narrowing, showing that despite the layoffs and hiring freezes, the global economy remains on the hunt for top tech candidates.
A Gartner survey revealed that two-thirds of employers see the candidate shortage as the most significant barrier to adopting new technologies and offering them to consumers. 3
Tech employers must carefully strategize to make the most out of the current situation and still flourish despite the limitations. Here’s how you can do it.
Invest in Your Current Workforce
It is important for you to come up with an efficient talent acquisition strategy that is agile enough to allow your company to navigate the year with fully equipped teams that are capable of bringing real value and innovation to your company.
In these times, you need to invest in your current workforce while potentially getting the support of outside agencies like staffing firms to bridge the gap.
Read more: 3 Things a Diversity-Driven Culture Says About You
Invest in Innovations that Are Spurring Strong Growth
The worldwide digital transformation is not yet complete. In fact, in 2027, it is expected to grow by 1.5 trillion USD, expanding almost three-fold from its 2022 value of 595 billion USD. 4
Innovations leading the way of rapid growth include generative artificial intelligence, machine learning, the Cloud, enterprise software, and enterprise systems, to name a few. Consider looking at these technologies or aligning your current products and services.
Focus on Retaining Your Top Candidate
Keeping your current employees engaged and productive is one of the surest ways to weather a muted tech sector outlook this year. One of the best ways to keep them active and competitive is to invest in their continued training through upskilling and reskilling.
As technology continues to evolve and the most groundbreaking innovations in tech today will already be passe, if not obsolete, several years from now, it is of utmost importance that employees engage in continuous training and learning to equip themselves with the skills and knowledge needed to succeed in this ever-changing sector.
Understand the Uniqueness of the Times
Note that despite the layoffs and hiring freeze happening in big tech, the unemployment rate has not skyrocketed. In fact, for the tech sector, unemployment remains benign at below four percent. There are more roles to fill than the people who can fill them. This again harks back to the importance of upskilling and reskilling your employees to help mitigate the skills mismatch that is perpetuating the current candidate shortage.
Read more: Rethink Candidate Potential, Win the War for Talent
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The candidate shortage should NOT be the reason that keeps your company from further scaling up. Let Focus People help you with your tech staffing needs. Reach out to us today to find solutions to your tech staffing concerns.
References
1. Clark, Mitchell. “The Tech Industry’s Moment of Reckoning: Layoffs and Hiring Freezes.” The Verge. The Verge, 14 Nov. 2022. Web. 21 Feb. 2023.
2. Duggan, Wayne. “January Inflation Data Show High Prices Holding Steady.” Forbes. Forbes Magazine, 14 Feb. 2023. Web. 21 Feb. 2023. https://www.forbes.com/advisor/investing/current-inflation-rate/
3. Beasley, Kevin. “Council Post: How to Navigate the IT Talent Acquisition Landscape in 2023.” Forbes. Forbes Magazine, 30 Jan. 2023. Web. 21 Feb. 2023. https://www.forbes.com/sites/forbestechcouncil/2023/01/27/how-to-navigate-the-it-talent-acquisition-landscape-in-2023/?sh=ce71e46e4d41
4. Beasley, Kevin. “Council Post: How to Navigate the IT Talent Acquisition Landscape in 2023.” Forbes. Forbes Magazine, 30 Jan. 2023. Web. 21 Feb. 2023. https://www.forbes.com/sites/forbestechcouncil/2023/01/27/how-to-navigate-the-it-talent-acquisition-landscape-in-2023/?sh=ce71e46e4d41