Tech layoffs in 2023: Causes, Consequences and Affected Companies

Quick Summary: Amidst the tumultuous year of 2023, a significant surge in layoffs has swept across the global tech industry. Giant organizations like Amazon, Google, and Meta, alongside various other start-ups, have been compelled to downsize their workforce on a massive scale. To provide a better understanding, we delve into the numerous factors contributing to these layoffs and their consequential impacts.  Additionally, we present an exhaustive list detailing the companies affected by these layoffs.

“Data shows that in 2023, on average, over 1600 tech employees were globally fired each day”.

After two years of phenomenal growth during the pandemic, as Covid's impact started to decline, online businesses encountered unanticipated difficulties. Russia's invasion became the tipping point, turning the situation into a dire state. Consequently, tech companies were left with an overworked workforce, which initiated layoffs that continue to persist in 2023.

In 2023, the number of layoffs in the tech sector increased significantly—226,000 workers were let go by tech companies. According to AltIndex data, this marked a nearly 40% increase from the 202,000 layoffs that occurred in 2022. The year 2023 has proven to be even more dire, with the tech industry experiencing a distressing downturn.

Many workplaces closed as a result of this wave of layoffs, leaving 2023 with the regrettable distinction of being the worst year ever for the tech sector. A startling 164,744 workers were let go in the tech sector between January and December of 2022, marking a sharp increase in layoffs. Compared to the 15,000 reported in 2021, this number was almost eleven times higher. Approximately half of all layoffs reported in 2022 occurred in January alone, with an alarming 75,912 people losing their jobs. Although the number of job cuts decreased in February, the trend continued with an additional 40,000 or so layoffs.

According to the information provided by Layoffs.fyi 2023 shows that over 200,000 tech industry employees lost their jobs. Among the other sectors, the retail industry received the hardest hit of layoffs. The consumer, hardware, and healthcare industries also saw significant job losses. While 2022 also saw a notable number of layoffs in the tech industry, the numbers were not as high as in 2023.

Underlying Causes for Tech Layoffs

Explore how these layoffs affect not just the employees but the industry, economy, and society as a whole.

1. Economic Ramification:

People began worrying about a U.S. recession in July 2022 when they observed the country's economy shrinking for two consecutive quarters. This concern sparked extensive discussions among economists and in the news, with experts predicting that a severe recession might soon impact several large economies. Other factors contributing to the uncertainty include the government's significant debt, the war in Ukraine and rising interest rates.

In such challenging times, when companies struggle to generate desired revenues, they may face tough decisions to sustain their operations. One of these choices is workforce reduction, commonly known as layoffs. Companies implement layoffs as a strategy to cut costs and navigate through financially challenging periods.

2. Inflation:

With a sudden rise in inflation in June 2022, prices went up, making it more expensive for people and businesses. As a result, people started spending less, and companies had to find ways to save money. Tech companies increased the prices for their services, which added to the financial pressure on businesses.

To cope with the extra costs, businesses often choose to cut their expenses, and one of the biggest expenses for many companies is paying their employees. When businesses reduce their spending, tech companies that rely on selling advertisements, such as Meta, Google, Instagram, Snap, and ByteDance, also felt the impact because these businesses cut back on their advertising spending, which, in turn, affects the revenue of tech companies.

3. High-Interest Rates:

When the Federal Reserve raises interest rates, it effectively increases the cost of borrowing money for individuals and businesses. This policy is implemented to curtail the rapid pace of economic growth and encourage financial prudence among consumers and businesses alike, thereby mitigating inflationary pressures. However, higher borrowing costs can also impact businesses, causing them to become more reticent to take on loans. Consequently, this can have a direct effect on investors, such as venture capitalists, who may be less likely to support new and potentially risky startup businesses. During times of economic uncertainty, businesses tend to exercise greater caution, resulting in less investment in startups and a reluctance to expand operations. Thus, higher interest rates can prompt both businesses and investors to adopt a more cautious approach to financial decision-making.

4. Over-hiring during the Pandemic:

The recent increase in layoffs is partly due to a correction in hiring too many employees. When the pandemic was at its peak, technology use surged as people turned to remote work, online shopping, and various online activities. This led to tech companies hiring aggressively to meet the demand, thinking this trend would continue. For example, Meta nearly doubled its workforce from 48,268 in March 2020 to over 80,000 by September 2022. However, as things returned to a more normal state with hybrid work arrangements and people spent less time online, the demand for tech services decreased, leading to a reduced need for new hires made during the pandemic.

5. Cuts in Hiring and Rise of AI Automation:

As technology companies downsize their workforce, the need for human resource personnel also decreases, resulting in significant layoffs in the recruitment sector. Additionally, automation has played a significant role in this trend. Although AI has not completely replaced jobs, it has disrupted certain areas. According to the World Economic Forum's The Future of Jobs Report 2020, AI is predicted to replace approximately 85 million jobs. However, on a positive note, the same report also anticipates that the AI industry will simultaneously create an estimated 97 million jobs.

6. Collapse of Silicon Valley Bank

In March 2023, significant changes came to light when Silicon Valley Bank collapsed. The bank had invested heavily in the tech sector without diversifying its portfolio. This sent an alarming signal to venture capitalists and banks, reminding them of the potential risks associated with investing in start-ups. It is important for investors to be cautious and consider every move carefully. The collapse of SVB serves as a reminder of the challenges and uncertainties that exist in the tech startup ecosystem.

Consequences

• Financial Impacts:

Losing a job can be a daunting experience for an employee, especially when it comes to paying bills and meeting basic needs like food, clothing, and shelter. Financial stress can be a serious concern for employees who find themselves struggling to make ends meet.

• Emotional Impacts:

Experiencing job loss can be a devastating ordeal, impacting both financial stability and emotional well-being. It can drain an individual's hope for a normal life and even affect their self-esteem. It is normal to feel this way in such a situation, but it should not be neglected as it can be difficult to navigate through.

• Career Impacts

When layoffs affect an entire industry, they can have a lasting impact on an employee's career. This makes it difficult to find a new job, particularly if the industry is experiencing a spike in layoffs at the same time, which can cause a saturated job market, or if the laid-off worker's skills aren't in high demand.  This may lead to a prolonged job search, which can be emotionally and financially taxing.

• Talent Depletion:

Losing a skilled workforce can result in a significant loss of knowledge and expertise for a company, particularly when they let go of long-serving employees. Although the organization may have valid reasons for doing so, it can have far-reaching consequences, especially if the company later realizes that they need those skills to remain competitive. It's similar to getting rid of a toolbox that has a plethora of unique tools, only to realize later that those tools were necessary.

• Innovation Slowdown:

Innovation is the lifeblood of the tech industry, and we all recognize its importance. However, layoffs can have a negative impact on this spirit of innovation. With a reduced workforce available for research, collaboration, and the development of fresh ideas, companies may find it difficult to keep up with the fast pace of technological advancements. It's essential to maintain a strong team to ensure that a company stays at the forefront of the industry.

• Competitive Decline:

Layoffs have the potential to erode a company's competitive advantage. Some businesses require an entire team to maintain their market position or create new products and services. As a result, the industry as a whole may weaken, with fewer companies pushing boundaries and driving innovation forward.

List of Companies and Layoffs Month-wise

Here is a complete list of all the layoffs that have taken place in the tech industry in 2023. The list is updated monthly. As per information provided by Layoffs.fyi, the total count of tech layoffs for 2023 stands at 262,915. This figure surpasses the total tech layoffs recorded in 2022 by 59%, based on the data provided by the tracker.

December

Spotify

• Job Losses: Approximately 1,500 employees
• Spotify's CEO, Daniel Ek, disclosed that the company is implementing its third round of layoffs for the year. This move resulted in a significant reduction of 17% of Spotify's workforce.

Intel

• Job Losses- 235 employees
• Intel's layoffs took place at its research and development facility in Folsom, Sacramento County.

eBay

• Job Losses: 20-25 employees.
• This was eBay’s second round of laying off its employees where this 10% workforce was fired.

November

Unity

• Job Losses: 265 workers
• Unity, video game software company laid off employees from its Wētā Digital division.

ONE

• Job losses: 128 employees
• ONE has reduced the workforce by 25%. The executives cite market conditions as the major reason for layoffs.

ByteDance

• Job Losses: Hundreds of employees
• ByteDance's layoffs came from the ‘Nuverse’ the gaming division as it struggled to compete against well-established gaming firms.

Amazon

• Job Losses: Several hundreds of employees
• Amazon's layoffs took place in their Alexa division and its newly launched Artificial General Intelligence Team

October

Nokia

• Job Losses: Approximately 14,000 employees
• Nokia, a telecommunications company, trimmed around 16% of its workforce due to declining sales in the US and challenging market conditions.

LinkedIn

• Job Losses: 668 employees
• Microsoft-owned LinkedIn reduced its workforce by about 3% due to a slowdown in hiring and ad spending.

Stack Overflow

• Job Losses: around 150 employees
• Stack Overflow, a coder resource, slashed 28% of its workforce to focus on innovation and profitability while facing competition from AI tools.

Bandcamp

• Job Losses: around 60 employees
• Music streaming service Bandcamp, recently acquired by Songtradr, laid off approximately half of its employees.

Qualcomm

• Job Losses: 1,258 employees
• Qualcomm trimmed 2.5% of its workforce as a cost-cutting measure, affecting various roles.

September

Google

• Job Losses: hundreds of staff
• Google reduced its recruiting teams due to a slower hiring process, resulting in significant job cuts.

August

Malwarebytes

• Job Losses: 100 staff
• Malwarebytes separated its business into two units, leading to the layoff of 100 employees.

T-Mobile

• Job Losses: around 5,000 staff
• T-Mobile downsized about 7% of its workforce to reduce spending, primarily affecting duplicative roles.

SecureWorks

• Job Losses: around 300 staff
• Cybersecurity firm SecureWorks simplified and scaled its business by laying off around 15% of its workforce.

Salesforce

• Job Losses: around 50 staff
• Salesforce eliminated around 50 roles in sales and customer service in Ireland.

July

CD Projekt Red

• Job Losses: 100 staff
• CD Projekt Red, a gaming developer, reduced 9% of its workforce due to overstaffing.

Virgin Media O2

• Job Losses: 100 staff
• Virgin Media O2 a gaming developer, reduced 9% of its workforce due to overstaffing.

Microsoft

• Job Losses: around 276 staff
• Microsoft laid off 276 employees, including 210 in Washington and 66 remote workers.

Evernote

• Job Losses: majority of US staff
• Evernote relocated its operations to Europe and reduced its US staff.

ClickUp

• Job Losses: around 90 staff
• Project management software company ClickUp laid off approximately 10% of its workforce.

June

Netflix

• Job Losses: Approximately 300 employees
• Netflix's decision was followed by the company's prior layoff of 150 employees in May.

Uber

• Job Losses: around 200 staff
• Uber made job cuts in its recruiting division, affecting about 1% of its total staff.

Bell

• Job Losses: Around 1,300 staff
• Canadian telecoms and media company Bell announced significant job cuts, including the closure of six radio stations and the sale of three. These actions resulted in layoffs of approximately 1,300 employees. The company noted that 30% of the affected roles were vacant.

Sonos

• Job Losses: Around 130 staff
• Audio manufacturer Sonos announced a 7% reduction in its workforce, with expected costs for severance packages and restructuring ranging from $11 to $14 million. The company also planned to scale back its real estate footprint. This came after a 12% staff reduction in 2020, in response to the pandemic.

TrueCar

• Job Losses: Around 100 staff
• Car buying platform TrueCar announced the layoff of approximately 25% of its workforce as part of a company restructuring. CEO Michael Darrow stepped down, to be succeeded by Jantoon Reigersman. The company's board chair, Barbara Carbone, stated that these cuts were necessary to achieve strategic priorities and long-term shareholder value.

Sumo Logic

• Job Losses: Around 80 staff
• Cloud software company Sumo Logic revealed an 8% reduction in its total workforce, impacting approximately 80 employees. This move was followed by the acquisition of Sumo Logic by private equity firm Francisco Partners for $1.7 billion.

23andMe

• Job Losses: Around 75 staff
• San Francisco-based biotech firm 23andMe announced the closure of 75 positions at the company. These job closures are anticipated to be completed by March 2024, following previous cuts in 2020 when 100 employees were laid off.

Reddit

• Job Losses: Around 90 staff
• As reported by the Wall Street Journal, Reddit planned to cut 90 positions within the company, which equaled around 5% of the workforce. CEO Steve Huffman conveyed the news in an email to staff, explaining that restructuring was intended to sustain the company's momentum. Hiring plans had also been scaled back.

Spotify

• Job Losses: Around 200 staff
• Spotify announced the layoff of around 200 employees, approximately 2% of its total workforce, specifically within its podcast division. The company indicated that it would continue to create original podcasts and expand its partnership program with podcasters globally. This move followed 600 job cuts at the company back in January.

May

Meta

• Job Losses: Approximately 6,000 people
• Meta revealed its decision to lay off approximately 6,000 employees. This announcement added to the ongoing workforce reductions that had affected about 21,000 people at Meta since November.

ZipRecruiter

• Job Losses: Around 270 staff
• Recruitment platform ZipRecruiter announced the layoff of 270 employees due to economic pressures resulting in lower-than-expected demand for new employees. Half of those affected worked in sales and customer support. CEO Ian Siegel agreed to a 30% pay cut.

BT

• Job Losses: Around 55,000 staff
• UK-based telecom company BT announced its plan to cut 55,000 jobs by the end of the decade, reducing the workforce of 130,000 employees. These cuts were anticipated as the company completed work on the UK fiber network and required less maintenance. CEO Philip Jansen noted that around 5,000 of these roles would be absorbed by restructuring, and approximately a fifth would be replaced by AI.

Vodafone

• Job Losses: Around 11,000 staff
• Vodafone's newly appointed CEO, Margherita Della Valle, announced the reduction of approximately 11,000 roles over the next three years from the company's one million employees. This decision came in response to financial performance that was deemed insufficient, with a focus on streamlining the organization and reallocating resources to better serve customers.

LinkedIn

• Job Losses: Around 716 staff
• LinkedIn, Microsoft's social media platform for business professionals, planned to cut 716 roles in sales, operations, and support teams to streamline decision-making processes. These cuts were accompanied by the creation of 250 new roles. Additionally, LinkedIn announced the removal of its service from China.

April

Amazon

• Job Losses: Approximately 27,000 employee
• Amazon announced the closure of its Halo Health division, effective July 31, as part of a broader restructuring that included various divisions. These job cuts were part of a larger workforce reduction plan, with 9,000 employees announced in March and an additional 18,000 layoffs in January. In total, these measures resulted in around 27,000 job cuts, equivalent to 8% of Amazon's corporate workforce for the year.

February

Twitter

• Job Losses: More than 200 employees
• Since Elon Musk took over Twitter in October of the previous year, the company's headcount had declined by over 70%.

Zoom

• Job Losses: 1,300 people
• Zoom announced a workforce reduction involving a 15% cut of its staff.

January

Alphabet

• Job Losses: 12,000 employees (6% of the global workforce)
• Google's parent company, Alphabet, made a significant announcement on January 21st, disclosing its decision to lay off 12,000 employees, amounting to 6% of its global workforce. These cuts affected divisions such as Area 120, Google's in-house incubator, and Alphabet's robotics division, Intrinsic.

Conclusion

In summary, the tech industry's dynamic nature often leads to frequent layoffs, affecting not only individuals but the industry as a whole. Employees grapple with financial strain, emotional distress, and career uncertainties, while the sector experiences losses in talent, innovation, and competitive vigour. To navigate this challenging landscape, individuals can employ coping strategies such as prudent financial planning, seeking emotional support, and exploring alternative career avenues. While the future of tech layoffs remains uncertain, one's ability to thrive relies on continuous learning, adaptability, and a robust network to stay resilient amid ongoing change.