The biggest IT and tech companies, especially in the US, are laying off their employees with a vengeance. What are the reasons for this unemployment of hundreds of thousands of workers?
After several years of strong growth, the tech giants are facing multiple difficulties pushing them to lay off tens of thousands of employees. How to explain such a decline among the world’s largest companies?
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The haemorrhage concerns the entire sector of web giants: 12,000 of the 187,000 employees d’Alphabet, the parent company of Google must leave their post. Spotify, the world leader in streaming music created in Sweden, is also cutting 6% of its workforce, or almost 600 jobs. Microsoft must cut 10,000 jobs by the end of March, while at Meta, the parent company of Facebook, Instagram and WhatsApp, 11,000 people will have to leave the company.
Same story at Twitter, Amazon, Vimeo, Salesforces… By aggregating all these figures, we thus obtain values that make you dizzy: even before the announcement of Alphabet, the site Layoffs.fyilisted nearly 194,000 job cuts in the sector in the United States since the start of 2022.
Growing too fast
Why such a backlash? The main reason is due to the excessive expansion of this sector during the Covid crisis. “Over the past two years, we have experienced periods of spectacular growth,” explained Sundar Pichai, boss of Alphabet. “To support and fuel this growth, we have hired in a different economic context than the one we know today”. The case of Microsoft is telling: the group has gone from 163,000 employees in 2020 to 221,000 in 2022, an increase of more than a third of the workforce.
Same story at Meta: in his press release announcing the first social plan in the group’s history, Mark Zuckerberg explained that with the Covid, “the world has moved online and the increase in e-commerce led to strong revenue growth.” According to the billionaire at the head of the company, “many thought that this phenomenon would become permanent […] I therefore made the decision to increase our expenses significantly. Unfortunately, the sequel did not go as planned.”
Investments without return
These favorable conditions no longer apply in times of inflation. To curb it, central banks raise their key rates, the borrowed money must then be repaid with higher interest. A way to limit expenses, and therefore inflation, but which makes it more difficult to finance a company and risks reducing the expenses of its customers. The tech giants, who can no longer invest as easily and who are seeing their revenues decline, must therefore part with the employees they had recruited by betting on a continuous expansion of their activity.
Some specific decisions may also affect individual companies. After his takeover of Twitter, Elon Musk announced that he wanted to “purify” the ranks of his employees. But the social network has lost almost all of its advertising revenue due to a loss of customer confidence. As for Meta, the investment in the “Metaverse”, a virtual world in which Mark Zuckerberg placed a lot of hopes, has so far turned out to be a fiasco causing more than 10 billion losses to the company alone. in 2021 according to CNBC.