{"id":87990,"date":"2022-12-27T18:08:00","date_gmt":"2022-12-27T22:08:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=87990"},"modified":"2023-01-24T16:56:47","modified_gmt":"2023-01-24T20:56:47","slug":"mass-layoffs","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/mass-layoffs\/","title":{"rendered":"Mass Layoffs Hurt Everyone\u2014What’s the Alternative?"},"content":{"rendered":"\n

Why do companies do mass layoffs? How do they harm companies and employees, even those who aren’t laid off?<\/p>\n\n\n\n

From tech to banking to consumer goods, industry giants like Amazon and Coca-Cola are laying off thousands of workers\u2014even while profits are strong. Mass layoffs are a deceptively damaging tactic that hurt company profits, productivity, and culture.<\/p>\n\n\n\n

Read on to learn more about the damaging effects of mass layoffs, including possible alternatives.<\/p>\n\n\n\n\n\n\n\n

Mass Layoffs\u2014A False Solution<\/h2>\n\n\n\n

This year, the U.S. has seen mass layoffs from industry leaders across sectors: Morgan Stanley, Google, Microsoft, Disney, and Walmart are just a few of the corporate giants handing out pink slips en masse<\/a>. <\/p>\n\n\n\n

The odd thing is that most of these companies are slashing workers while making healthy profits<\/em>. For example, Tesla cut 10% of its workers despite having one of the strongest quarters in the company\u2019s history. This is in stark contrast to the historical view of layoffs as an emergency relief valve when a firm\u2019s budget gets too tight.<\/p>\n\n\n\n

Big tech appears to be leading the pack, as Twitter, Meta, and Amazon collectively sacked thousands<\/a> of workers despite strong company performances. As one Stanford business professor put it, many businesses are cutting workers because they see other firms doing it<\/a>. (Ironically, one study claims that layoffs hurt profits more in the tech sector than other industries because tech firms\u2019 main value comes from their staff, like software engineers and app developers.)<\/p>\n\n\n\n

In this article, we\u2019ll examine how mass layoffs hurt companies and workers alike, plus some alternatives to mass employee layoffs.<\/p>\n\n\n\n

A Look at Big Tech Layoffs<\/h3>\n\n\n\n

The technology industry seems to be struggling as the world emerges from the Covid pandemic and life returns to in-person normalcy. Well over 100,000 tech workers lost their jobs in 2022\u2014in November alone, various tech companies announced around 34,000 layoffs<\/a>, including 11,000 layoffs by Meta and 10,000 by Amazon. This is part of a larger trend in the technology sector, which has seen share prices falling for much of 2022<\/a>, including a massive $400 billion drop at the end of October<\/a>. Some people are worried that the shrinking tech sector is a sign of larger economic problems to come<\/a>\u2014however, many economists don\u2019t believe that\u2019s the case<\/a>. <\/p>\n\n\n\n

Why So Many Layoffs?<\/h4>\n\n\n\n

To begin, let\u2019s examine why major tech companies are struggling in the first place. <\/p>\n\n\n\n

Experts believe that there are two major drivers behind the mass layoffs<\/a>. First, the Covid pandemic created enormous demand in the technology sector as people moved much of their lives and work online. Now, as people are starting to meet and work in person again, many tech companies (who may have assumed that pandemic life was the \u201cnew normal\u201d<\/a>) are finding themselves with more employees than they can use. <\/p>\n\n\n\n

Second, economic growth\u2014especially in the U.S., where many of the largest tech companies are based\u2014is slow and threatening to get slower. In fact, many economists believe that the U.S. is likely to enter an economic recession within the next year<\/a>. As a result of that projection, many companies are trying to reduce spending and build up a financial buffer, which they\u2019re doing in part by reducing their workforces. <\/p>\n\n\n\n

The good news is that, despite nearly 120,000 tech jobs disappearing this year, unemployment among tech workers is still quite low<\/a>. This likely means that the tech sector isn\u2019t shrinking as some people fear; rather, a few large companies created a bubble based on overly optimistic predictions, and now the market is correcting itself. Furthermore, now that a few giants aren\u2019t monopolizing the talent pool anymore, smaller companies<\/a> and interesting new projects<\/a> have their own chances to grow. <\/p>\n\n\n\n

Finally, economists say that these layoffs are probably not a sign of a looming recession<\/a>. They explain that tech jobs are a relatively small part of the overall job market, and that sudden spikes of layoffs in that sector haven\u2019t led to recessions in the past.<\/p>\n\n\n\n

Layoffs Hurt Companies \u2026<\/h3>\n\n\n\n

So, how do mass layoffs harm companies? By the 2000s, mass firings became common enough that most Americans accepted them as part of working life. But despite the hype, the tactic generally did more harm than good. <\/p>\n\n\n\n

In fact, research reveals that layoffs seldom deliver results<\/a> in any of the areas that executives commonly use to justify large-scale firings. <\/p>\n\n\n\n