https://www.economist.com/business/2023/03/27/where-have-all-the-laid-off-tech-workers-gone

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[                    ]
Business | The sack of Silicon Valley

Where have all the laid-off tech workers gone?

Employment in the technology industry has reached an inflection point

FILE PHOTO: A cyclist rides past the Meta sign outside the
headquarters of Facebook parent company Meta Platforms Inc in
Mountain View, California, U.S. November 9, 2022. REUTERS/Peter
DaSilva/File Photo
Mar 27th 2023
Share

To understand the shift in tone that has taken place in Silicon
Valley in recent months, look no further than Mark Zuckerberg's
declaration in February that 2023 would be the "year of efficiency".
It is hardly the kind of language to set the pulse racing--unless you
are an employee on the receiving end of it. On March 14th Meta, the
tech giant Mr Zuckerberg runs, announced it would fire 10,000
staff--on top of the 11,000 it laid off last November.

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Meta is not alone. On March 20th Amazon, another tech behemoth, said
it would cut a further 9,000 corporate employees, having already
sacked 18,000 white-collar types. So far this year American tech
firms have announced 118,000 sackings, according to Crunchbase, a
data provider, adding to the 140,000 jobs cut last year.

Investors have cheered tech's new-found cost-consciousness. The
technology-heavy NASDAQ index is up by 17% from its recent low point
in late December. The companies are hearing the market's message loud
and clear. On March 24th the chief operating officer of Salesforce, a
business-software firm, hinted that the company would soon add to the
8,000 lay-offs it announced in January.

[20230401_W]

They have a way to go: firings since the start of 2022 represent only
6% of the American tech industry's workforce. Because tech companies
continued to hire throughout 2022, lay-offs have only just begun to
reduce total industry employment (see chart 1). By comparison,
between the peak of the dotcom boom at the start of the 2000s and its
nadir at the end of 2003, America's overall tech workforce declined
by 23%, or 685,000 jobs.

Still, the recent lay-offs have already been widespread and deep
enough to warrant two questions. First, who is getting the chop? And
second, where are the laid-off workers going?

[20230401_W]

So far techies themselves have been mostly spared, observes Tim
Herbert of the Computing Technology Industry Association, a trade
body. Instead, the axe has fallen mainly on business functions such
as sales and recruitment. These had grown steadily as a share of
technology-industry employment in recent years, a telltale sign of
bloat (see chart 2).

Between the depths of the pandemic in the spring of 2020 and peak
employment at the start of 2023, the tech sector added around 1m
workers. Simply enlisting such numbers required hiring plenty of
recruiters; as a headhunting rule of thumb, one recruiter can hire 25
new employees a year. Many of those same recruiters may now be
surplus to requirements.

But the specialists are not immune to the efficiency drive. As part
of its lay-offs, Meta will restructure its tech functions in April.
Releasing talented tech workers back into the wild could be a boon
for other sectors wrestling with digital reinvention. For years
unsexy industries like industrial goods have struggled to compete
with the tech industry for talent. Now they are pouncing. John Deere,
an American tractor-maker, has been snapping up fired tech workers to
help it make smarter farm machinery. Last year the firm opened an
office in Austin, a thriving tech hub in Texas. Carmakers,
increasingly focused on software, are also hungry for technologists.
So are banks, health insurers and retailers.

Some of the laid-off techies are helping fuel a new generation of
startups. Applications in January to Y Combinator, a startup school
in Silicon Valley, were up five-fold on the previous year. Excitement
is particularly strong in the buzzy field of ChatGPT-like
"generative" artificial intelligence (AI), which uses complex
algorithms and oodles of data to produce everything from essays to
artworks--so much so that even big tech continues to hire
enthusiastically in the area.

Optimists hope that this technology will, like the smartphone before
it, unlock a new wave of creative destruction, as AI entrepreneurs
conjure up a variety of clever applications. The new AIs may in time
mean even less need for, say, human marketers. But they could, like
other breakthroughs before them, create entirely new job
categories--not least in the technology industry itself. #

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This article appeared in the Business section of the print edition
under the headline "The sack of Silicon Valley"

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