How Big Tech is using mass layoffs to bring workers to heel

Brian Merchant, Los Angeles Times on

Published in Business News

by Brian Merchant

In Silicon Valley, the new year began as the last one ended — with tens of thousands of tech workers losing their jobs. Just a few days into 2023, Amazon Chief Executive Andrew Jassy announced that there would be 18,000 layoffs across the company. Within weeks, Microsoft revealed it was slashing its head count by 10,000 and Google said that it was terminating 12,000 employees. IBM looks to be next, with nearly 4,000 workers on the chopping block.

This follows 2022’s bloodbath, when tens of thousands of jobs were lost at Meta Platforms, Twitter and Salesforce. According to an industry layoff tracker, the tech sector has eliminated some 220,000 jobs since the start of last year. If the laid-off tech workers formed a city, it’d be one of the most populous in the United States, bigger than Des Moines or Salt Lake City.

The question is: Why have many of the most profitable companies of our generation — most of which are still very much profitable — announced staggering rounds of layoffs, one after the other? And why now?

A common refrain from analysts and reporters is that the companies are “tightening their belts” after profligate pandemic hiring sprees, in order to streamline operations. The executives overseeing the cuts, for their part, cite adverse economic circumstances. “We hired for a different economic reality than the one we face today,” Google CEO Sundar Pichai said in his layoff announcement. Jassy wrote that “Amazon has weathered uncertain and difficult economies in the past, and we will continue to do so.” Microsoft’s Satya Nadella noted that “some parts of the world are in a recession and other parts are anticipating one.”

No recession has yet hit the U.S. or its tech sector. Inflation hurts, but the U.S. economy added hundreds of thousands of jobs last month. Still, certain shareholders have been vocal about their desire to see head counts trimmed — and trimmed further still.


To that end, critics argue that simple greed is driving the layoffs; they point to the tens of billions’ worth of stock buybacks the tech companies authorized last year. The Verge’s Elizabeth Lopatto spoke with industry analysts who said that tech companies are evaluating their bottom lines differently, and concluded that they’re doing layoffs mostly because everyone else is, even though layoffs actually often cost a given company money. And the fact all these layoffs are happening in such rapid succession gives the companies some cover — making them seem elemental, inevitable.

So what’s really going on here? The answer may actually be pretty simple.

“Controlling labor costs via periodic layoffs is like breathing for Silicon Valley: cyclical, necessary for life,” Malcolm Harris, author of the forthcoming book “Palo Alto: A History of California, Capitalism and the World,” told me. The layoffs, Harris says, have “very little to do with long- or even medium-term strategy except as it pertains to cultivating an insecure workforce.”

That tracks with the economic reality we do face today, as a tech CEO might put it. Because while a recession has not yet arrived in any meaningful form, there is another economic indicator pointing to the desirability of layoffs, from a large employer’s perspective: a growing effort to organize tech workers in an unusually tight labor market.


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