In recent months, there has been a noticeable change in the tone of Silicon Valley. This is exemplified by Mark Zuckerberg's recent announcement that 2023 will be focused on efficiency. Although this language may not elicit excitement, it's significant for the employees who will be affected by it. As an example, Meta, the company run by Zuckerberg, recently announced that it would be laying off 10,000 employees in addition to the 11,000 let's go last November. Amazon also recently announced plans to cut 9,000 corporate positions, following the 18,000 already laid off. In total, US tech firms have already announced 118,000 job cuts this year, further contributing to last year's 140,000 redundancies. There may be more to come, as the chief operating officer of Salesforce implied that the company would soon be making more layoffs on top of the 8,000 announced in January.
The tech industry's newfound focus on cost-cutting has been met with approval from investors, as seen in the Nasdaq index's 16% growth from its low point in December 2021. However, there are more layoffs to come, with only 6% of the US tech industry's workforce affected since the start of 2022. Due to continued hiring in 2022, total industry employment has yet to show a significant reduction (refer to chart 1). In contrast, during the peak and end of the dotcom boom, the US tech workforce suffered a decline of 23%, equivalent to 685,000 jobs. Although the layoffs have been widespread, two key questions arise: who is most affected by job cuts, and where are the displaced workers finding new opportunities?
The tech industry has experienced job cuts recently, primarily in business functions such as sales and recruitment, rather than tech roles. The growth of these businesses functions as an indicator of excessive staffing levels. However, the layoffs have also affected tech specialists, with Meta restructuring its tech functions in April. The redundant tech workers are being sought after by other industries such as John Deere, which is hiring them to develop smarter farm machinery. Carmakers, banks, health insurers, and retailers are also keen on hiring tech talent. The laid-off techies are also fueling a new generation of start-ups, with applications to start-up schools in Silicon Valley up fivefold in January. The exciting field of Chatgpt-like “generative” artificial intelligence is also attracting optimism, as it uses complex algorithms and data to produce essays and artworks. This technology could create entirely new job categories, including within the tech industry itself, similar to the previous waves of creative destruction.