I know lay-offs seem to be happening a lot, especially in tech right now, and can happen at any point – but just this month there has been Microsoft, Discord, Twitch, Google and RIOT lay-offs to name a few, and I’m sure many others.
Unless it’s just coincidence, why do these lay-off announcements seem to be like a chain reaction? I’m guessing that there must be economical reasons as to why, such as boosting numbers before a certain reporting season? Or is it just to stay competitive in terms of profit margins?
In: Economics
Most of them operate on the same financial calendar, so they generally re-evaluate their staffing and expenses around the same time every quarter.
And yes there’s definitely some herd mentality at play, they see one company make the unpopular leap first and decide now’s the time to announce their own layoffs so they can all just be together and blame it on market forces and no company gets singled out for media anger.
The company you run loses 3% of its value this year. You did a good job if your competitors lost 15%, you did a bad job if your competitors grew 5%. To account for factors outside your immediate control, executives are incentivised for results compared to competitors. If your competitor just saved 100million dollars through layoffs you too need to save 100million dollars. Chances are the justification for company A doing layoffs applies for company B
Monkey see, monkey do
as much as everyone loves to say there is a grand plan most of the time it’s someone starts the ball rolling in one direction and then the BOD starts saying ,’ why aren’t we doing that too?’
The mega corps have kind of tapped out on the innovation mostly by buying up the emerging competitors in mobile technology and social media so now they are consolidating.
Good thing is that usually spurs people to start up new projects on their own since big companies aren’t hiring which then leads to more jobs. Bad news is that it sucks for a long time waiting for that to happen and without easy access to money it makes it very hard
I imagine High rates have an effect on the tech industry first and pretty cumulatively and simultaneously
People speaking to a herd mentality, I doubt it at least within the same month. It takes time to figure out who get laid off and not to mention get all the steps in place to carry out the layoff. If layoffs are happening in a month to a bunch of companies it would have been in the works for much longer.
Its not what is happening exactly in this month, but a lot of general cases are traditional business signaling.
So generally these companies either can’t (for legal reasons) or won’t (for competitive reasons) coordinate things in the industry. However there is a business move that you can do ‘signaling’ that you are doing something and thats also the go-ahead signal for others in the industry to do the same, now that you’ve done it and they can do the same to stay competitive, probably because they have the same exact issue as you do.
This is a pretty common tactic used a lot in price changes, such as airlines or cable companies will announce price changes, and within a month or so all the others in the industry will magically announce price changes too, how convenient!. It also happens during labor force draw downs— especially if you are a public company. Why? Because the market sees it happening, and generally when these occur, stock value increases, so once someone went first, their stock popped, and the best business move is for you also to have your stock rise. Stock rises of 10% (which is great!) are not uncommon. You may not think this way, but the execs and owners of these companies certainly do
To suppress wages.
If there’s a lot of people in an industry looking for work all at once, they have a harder time finding a job & are willing to take lower salaries
Multiple reasons:
1. They are reacting to the same economic environment (end of quantitative easing, rising interest rates, reduced frivolous spending by consumers and businesses).
2. They are on the same fiscal calendar, and need to boost their quarterly or end-of-year numbers at around the same time.
3. Shareholders see a competitor doing layoffs and increasing margins and demand their company do it as well.
4. They are piggybacking off each other to lessen the bad publicity.
In addition to what other people have said, if multiple companies layoff hundreds of thousands of employees in a short time frame, these people are gonna saturate the jobs left in the market and start a race to the bottom in salaries where employers can lower the market’s salaries for some professions turning it into a employer favored market.
If enough people are out of work at the same time it will depress the local wage market so when they start hiring again it will be cheaper.
Cut headcount to make the share price look better at the end of the quarter then Re-hire some of them (or staff sacked by other companies) at (effectively) lower wages.
Keep running the hire and fire cycle while taking an ever increasing cut of the profit that these people provide while pushing them to work harder or get laid off.
Toxicity is intentional, the cruelty is intentional, they would render you down for glue if it was profitable.
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