Shaza Arif-Tech Layoffs-MDS

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Has the tech industry’s rapid growth come at the cost of its workforce?

Contrary to general perception, in recent years, the tech sector has entered a rather turbulent phase, marked by massive layoffs. 2022 witnessed a staggering  649% increase in layoffs, which continued to manifest itself in the subsequent year. The first quarter of 2023 witnessed a peak in layoffs and the tech industry underwent its most significant contraction in the last ten years, with the loss of more than 240,000 jobs. While the trend showed some respite in the summer and fall of 2023, the industry is apparently bracing itself for further layoffs again as we enter 2024. The New Year commenced with substantial workforce reductions, with 23,670 layoffs in January alone.

Most recently, Google announced its downsizing move, downsizing hundreds of workers across different sectors. The organisation is looking for cost-cutting measures and pivot towards a greater emphasis on Artificial Intelligence (AI), which is also expected to take on tasks traditionally performed by humans. Major sectors experiencing these redundancies include its core engineering division, the voice-powered Google Assistant and Augmented Reality (AR) team.

Google is joined by other tech companies in pruning their workforce. Microsoft also announced a cut in its team by laying off 1900 employees in its gaming division. Xerox recently announced a 15% reduction, currently at 23,000 employees. Likewise, the prominent video game software provider Unity also reported a decrease of 25% of its workforce by shedding 1800 positions. Amazon has cut hundreds of jobs across Prime Video and Amazon MGM Studios. Layoffs have also targeted its streaming service, Twitch, which recently dismissed 500 employees. These workforce reductions have extended beyond large corporations, affecting smaller startups as well.

This ongoing trend, with no end in the near future, is fueled by several factors: economic downturn, increasing inflation, higher interest rates, strategic restructuring, excessive hiring during the Pandemic and investor pressure. The growing incorporation of AI stands out as a notable aspect, drawing heightened attention due to its expanding presence and the resulting discussions about its potential effects on the job market. Although not all layoffs are due to AI, several mega tech companies like Google, Duolingo, Dropbox, Chegg, and IBM have explicitly tagged their new focus on AI as the primary reason for rationalising staff. Spotify’s case is a good example. It introduced the Spotify Wrapped feature, powered by AI, to enhance user engagement and promote brand presence. A few days later, after launching this AI-enabled feature, the organisation announced a significant reduction in workforce by 17% .

More companies opting for AI as a future revenue driver highlights the broader industry-wise shift towards increased automation. This shift is leading to a fundamental restructuring where tech companies are re-evaluating their workforce needs, profoundly impacting the future job market. A more comprehensive integration of AI capabilities, particularly generative AI implies that tech companies will be better positioned to optimise their operations while simultaneously reducing employees across different sectors. Such trends may also impact remote jobs of individuals from developing countries who are currently associated with multinational companies in developed countries.

It is also pertinent to highlight the irony that the same tech companies that continue to pour vast amounts of capital into AI are letting go of their human capital so easily. While companies can improve their efficiency, these recent moves can considerably impact organisational morale as uncertainty looms large regarding future employment.

The prevailing situation highlights that integrating AI will alter job roles and skill requirements, calling for ongoing upskilling and reskilling to stay in step with the evolving technological environment. While large corporations often provide transition support to their employees, it is essential to understand that, despite their current disheartening nature, these changes could eventually be seen as a period of transition towards more advanced and efficient technological systems. Looking ahead, the integration of AI and automation could pave the way for new and varied job opportunities for employees. One should not rule out the possibility of new job demands in AI development, AI implementation, data analysis and cybersecurity sectors may grow at a rapid pace. Such trends may lead to a dynamic workforce while enhancing innovation, economic growth, and technological progress.

The fluctuating tally of ‘pink slips’ across the global tech industry not only highlights the ongoing realignment of the job landscape and skill evolution as AI and other technologies redefine our routines but also serves as a critical prompt for employees. It is a call to action for individuals to actively pursue upskilling and reskilling opportunities. This approach is essential for adapting to these changes, ensuring that one remains compatible with the future demands of a tech ecosystem that is increasingly influenced by AI. 

Shaza Arif is a Research Assistant at the Centre for Aerospace & Security Studies (CASS), Islamabad. The article was first published in Modern Diplomacy. She can be reached at: cass.thinkers@casstt.com.

Design Credit:  Mysha Dua Salman

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