What Is the Main Reason for Mass Layoffs at Companies like Meta and Google?

The technological world has been the protagonist in recent months, not only because of the new advances that are becoming more frequent every day, but also because of the large amount of news that has been heard about technological multinationals. The reason is that, in the midst of the current economic crisis, they have had no choice but to announce massive layoffs around the world.

The most recent case was Spotify. The leading audio streaming platform announced, on January 23, that it will make a cut of at least 6% of its workforce. This, translated into numbers, represents some 600 people who will lose their jobs in the coming weeks.

The same percentage was the one announced days before by Alphabet, Google's parent company, although with a difference in the number of people laid off. Of the 187,000 people who work for this internet giant, at least 12,000 will leave their jobs.

A similar number is the one announced by Microsoft. On January 18, this company notified that it will lay off at least 10,000 people before the end of March. This is a little less than 5% of the more than 221,000 employees it has.

The company created, and until a few years ago directed, by Bill Gates was justified by current problems such as economic uncertainty (with the threat of recession on the table) and changes in the priorities of clients throughout the planet.

Amazon was not far behind and was the first technology giant to announce layoffs at the beginning of 2023. On January 5, the e-commerce multinational announced big changes, mainly in areas such as its warehouses and the human resources department. He notified that "a little more than 18 thousand people will come out."

For its part, Meta (parent company of important social networks such as Facebook, WhatsApp, and Instagram) will have to undo at least 11,000 jobs, a number that corresponds to 13% of its employees worldwide.

Finally, there is Twitter. The social network acquired by Elon Musk in 2022 announced in November that it would execute a cut plan that would affect at least half of the 7,500 people who collaborate in this company.

It may interest you: The Best Companies to Work for In Latin America

Why so Many Layoffs?

For experts, it is clear that situations such as the microchip crisis caused by the COVID-19 pandemic, as well as the recent war between Ukraine and Russia, and the (almost non-stop) increase in interest rates in the United States are issues that have impacted the natural processes of these technological giants. However, for these same analysts, there is a previous factor that caused these crises to trigger massive layoffs of workers: excessive hiring. For EY CEO Carmine Di Sibio, the job's crisis stems from what he considers to be a process of “intense hiring” before and during the pandemic. That is, there was a scenario of "overcontracting".

This is also explained by CNBC, which indicates that "in 2020, widespread COVID-19 lockdowns made Internet applications more important to people, which boosted the businesses of many technology companies."

To make this point clearer, the same chain produced a report in which it showed with a magnifying glass what the overcontracting scenarios were like in some of the companies that have now had to resort to layoffs to balance the economic burdens within:

• Microsoft: In 2021 alone, it hired more than 40,000 employees, a number that was reduced to 18,000 new hires in 2022. However, it was still many new jobs.
• Goal: the company, which until 2021 was generally called Facebook, hired more than 13,000 people that year; the same number of employees arrived in 2022.
• Alphabet : in 2020 (the year the pandemic began), the giant that owns Google added more than 16,000 employees; a figure that increased to 21,000 in 2021. Thus, it reached more than 156,500 workers.
• Amazon: the company formerly chaired by Jeff Bezos was the one that added the most people to its payroll: more than 310,000 employees in 2021 and an incredible 500,000 in 2020, when the boom in homes grew considerably due to anti-covid measures.

What About Apple?

In the midst of the news of massive layoffs, and with several companies joining the list every day, there is a giant that still remains on the sidelines of this global crisis: Apple. The company founded by the late Steve Jobs has been able to stay at bay from nominal problems, thanks to what experts have considered a practice of "growing with awareness."

The numbers are simple: according to the Wall Street Journal, from September 2019 to the same month in 2022, Apple “only” grew its staff by 20% more. It's a stark contrast compared to competitors like Meta, which increased its workforce by 92%, or Amazon by 100%.

However, there are other key factors to consider that have helped prevent Apple from joining the layoff pack :

1. Tim Cook, CEO of the company, requested a cut of at least $35 million in his 2023 salary, which represents 40% less than in 2022. This in order to help the company's coffers.

2. Apple invests less, but better, which represented an 8% increase in sales and 9% in earnings per share in 2022. Thus, it was the technology giant with the highest turnover, but also the one with the least diversification of investment.