Why are there so many tech layoffs

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The tech layoff has been nonstop since 2023 and it’s been continuing even in 2024 as well. So far in 2024, more than 50,000 employees have already been laid off from 122 tech companies including top companies such as Amazon, Google, and Microsoft…

Let me help you steer through this tough situation and also help you understand why are companies laying off so we can understand the current scenario. Think of this guide as your insights into what’s happening and how you can navigate around this and finally get employed.

The fault is of Job Seekers and Employers and even Countries, that’s right even countries are at fault here, so let’s begin with reasoning.

Fault of Job Seekers

It all started with 2020 COVID-19, that’s right it all goes long back to 2020. Until 2019, The tech hiring was a soothing sail, there were layoffs occasionally but it was normal not like the current situation.

During 2020, many countries placed lockdown, it was probably one of the worst times in the 21st century (probably after the 2008 financial crisis). People who were accustomed to doing their day-to-day activities such as socializing with others were suddenly forced to stay at home for longer periods and were only allowed to go out for necessary situations (Purchasing daily goods, necessities, and medical emergencies).

Many of them played games, watched movies regularly, found new hobbies, and learned new things that they could never have imagined doing in their day jobs(most of them would have been tired out by the time they came back home through commuting and busy schedules).

Introverts like me who hate unnecessary socialising, couldn’t have asked for a better situation than this. But people needed one way or the other to spend their leisure time learning new things and keep themselves busy by being engaged and entertained. 

That’s when most of them started to learn to code. Most of the online tech influencers also started popping up offering their courses and bootcamps in a way to capitalize on the demand that has been created. These were prevalent even before COVID-19, however, during 2020 it gave a boost to more of it as people had more time and could explore new avenues.

Since the competition was also stiff among the tech influencers and online tutors, so many bootcamps and courses started to create fake promises and hope to their candidates that they could find a job in tech and started to nitpick the examples of high salary packages being offered to very few and advertising it as being industry standard for those working in tech.

Now we have job seekers claiming themselves as software engineers who have completed a 3 months bootcamps, we have job seekers who don’t know what are software development cycles, We have job seekers who don’t know why they are using a framework/library they just pick it because that’s what’s trending or what everybody else is using or what has the most amount of jobs, We have job seekers who contribute to open source thinking that green graph on their GitHub profile will get them hired. 

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Now you start to see the competition between those who graduated with a Computer Science degree and those with bootcamp certificates. There are also too many developers focused on working on what’s trending, for example: people looking to work on reactjs are more than employers hiring for React developers. The demand for specific roles such as cyber security and others is still high but there are very few skilled talents pursuing it.

Fault of tech companies

layoffs graph showing from march 2023 to feb 2024

Now the fault of companies is that they too saw the opportunity during COVID-19 that there was demand for everything related to online business. To meet the growing demand companies started blindly hiring people, To attract more candidates companies started offering huge salary packages, bonuses, and benefits. This ultimately led to more candidates joining the companies than necessary, Instead of focusing on profits companies started to burn investor money and kept making losses thinking that the demand would continue to grow post-COVID. But as we know the countries slowly started opening up again and lockdowns were lifted. 

The demand and supply in the market were starting to seem normalising but now that the companies have burned the heavy cash by investors, there was not enough liquidity in the market which made the situation worse as we later saw during 2022, inflation started kicking in. 

People also slowly started to feel the effects of inflation.

Governments around the world and their Feds increased the interest rates which made taking loans more expensive for both businesses and consumers, and ultimately everyone ended up spending more on interest payments.

To compensate for this, businesses started to raise the prices of their products. Most of the customers feeling the shock of inflation started to spend only on necessary items and churned( Unsubscribed / stopped spending money on unnecessary things) this made companies make more losses. 

Then we come to 2023, The companies stopped handing out huge salaries and benefits like they used to during 2020. Still, most of the companies couldn’t handle the amount of losses they were making, Most of the startups and companies went bankrupt. 

an image showing the top tech company losses
Top tech company losses compared to all time high during pre & post covid

So it was a do-or-die situation for most of the companies, so we started to see the layoffs season that started to take effect in 2023, which is continuing.

Even after all the layoffs companies are still hiring now more than ever but very few are getting hired because companies have huge pools of talent and it’s getting harder to evaluate and hire everyone so they have started making it harder through coding interviews and evaluating candidates based on data structures and algorithms.

Fault of countries

Now that we know the faults of Companies and Job Seekers, there are also faults of countries that are directly or indirectly related to the current situation.

Many small geopolitical issues could have led to this, but I will mention major events that I know could be possible reasons for this.

On 24 February 2022, Russia Invaded Ukraine. With this news spreading Western countries and Europe sanctioned Russia from accessing its foreign reserves and blocked its exports to Western and European countries. Many countries in Europe were entirely dependent on Russian oil to run, especially during winter. Countries like Germany, the Netherlands, Poland, and a few others

The Western countries had already sanctioned many countries such as Iran, and Venezuela that had oil reserves and producing capacity but they had placed sanctions on them so neither they could sell it to the West nor Europe. 

Now come the OPEC+ countries (major oil-producing countries) joining hands in the current scenario and trying to make more profit from the current situation by creating fake scarcity of oil by reducing oil production which led to an increase in the price of oil per barrel. (Source:Why is OPEC+ cutting oil production and what’s next? | Explainer News | Al Jazeera)

As you might know, our economies are interconnected and dependent on transporting cargo and goods through vehicles even the huge ships that transport from one country to another require fossil fuel. 

This is when citizens and businesses around the world felt the effects of inflation. The cost of transporting and delivering goods from point A to point B became costly which ultimately was shifted to customers who had to pay for it. 

The effects of inflation and growing distress among countries too are growing. One recent such event was on 27 October 2023, when Israel invaded Gaza stating retaliation for attacking them.

Conclusion

Countries are now willing to spend more on defense than on the human development of their respective citizens. We could see the effects slowly taking shape one way or the other. 

The contiguous layoffs will ultimately end but not sure when it will, Until then my suggestion would be to not follow the herd mentality and try to find what you are truly feel passionate about and follow it, even if it doesn’t sound as glamourous as working at FAANG or working at a job that pays you more than what’s needed. 

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Just a suggestion: The mundane tasks are going to be replaced by AI just find something that can only be done by humans. Even programming won’t be replaced by AI as people make it seem to be, there’s still a need for skilled developers who are not just copy-pasting monkey and who understand what they are doing and how to achieve the results of certain problems.

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