IT Career Guide

Understanding the Job Loss Trend in Tech

Alarming Yet Inevitable: Understanding the Job Loss Trend in Tech

The tech industry has taken a massive blow to its workforce in the wake of a global pandemic and a series of international conflicts. From streamlining redundancies to folding in the current market situation, this unemployment wave affects all levels of the industry.

In fact, a recent study on global tech layoffs revealed 127,000 employees losing their jobs in the first two months of 2023. It is already en route to breaking the previous year’s record of 154,336 employees laid off from over 1,000 companies.

However, this job loss trend has been in the works for the last few years. This article aims to examine the factors at play and what the future holds for the IT industry.

How the COVID-19 Pandemic Accelerated Change

The pandemic came and went as quickly as it entered the public consciousness. However, its economic impact remains. The pandemic has even changed how we do business and how we interact with our technology.

A Quick Refresher on the Coronavirus Pandemic

COVID-19 first manifested in Wuhan, China, in December 2019. Failure to contain it at this stage soon led to a global pandemic, which became an international public health emergency in January 2020. Shortly after, the death toll started climbing, even as countries tried to mitigate its spread. Airports and terminals were closed immediately, and people were confined indoors for several months.

It ultimately claimed almost seven million lives and was projected to create an $8.5 trillion deficit in global economic output—the effects persist to this day.

Responding to an Urgent Need

While people figured out ways to survive during the lockdown, necessity and ingenuity changed how we rely on technology. Businesses had to shift to remote working arrangements, and online shopping transformed dramatically.

From the tech industry’s perspective, it has highlighted the urgent needs of the times. It accelerated progress in robotics, telecommunications, and digital payments. Going back to commerce, grocers and neighborhood restaurants also adopted contactless payment and delivery services. Larger enterprises have started using robots to take orders and deliver them.

It also ushered in the period of remote work, one response that continues well past the pandemic scare. Remote work was made possible with different technologies. From setting up virtual private networks (VPN) to implementing new endpoint detection and response (EDR), the IT and cybersecurity sectors had to adapt as they ferried enterprises during this era.

Whether going for groceries or making reports for work, the fear of human contact during COVID has incentivized contactless technologies and robust wireless systems.

However, the changes brought about by the coronavirus pandemic don’t end here. If anything, it only preludes more global challenges that ultimately create the alarming job loss trend in the tech sector.

External and Internal Factors Leading to Job Loss

As global economies struggled to rebuild as soon as the pandemic stabilized, it highlighted a new gap: foreign relations. The development, trade, and provision of COVID-19 vaccines or particular pandemic responses have created new diplomatic tensions and intensified existing ones.

This scourge on international relations prompted the United Nations Security Council to pass a resolution that demands a global ceasefire from all member states by December 2020.

Reigniting the US-China Tensions

China and the United States have long shared a complex bilateral history of conflict and cooperation. The recent trade war had been underway for a couple of years before the pandemic started, and its release to the world only made things worse.

At the start of 2020, the Trump administration started blocking non-US citizens from China from entering the United States. Top brass from both countries traded blows and insinuated who was the cause of the pandemic.

Shortly after, China started expelling journalists from US publications, creating an escalating exchange between the countries. The US soon ended preferential trade status with Hong Kong, recognizing the territory as a free state separate from Mainland China’s reins. It even led to the closure of the economic giants’ consulates.

The trade war has disproportionately focused on the tech industry. Leveraging its position in the international community, the US imposed sanctions against China, forcing the Asian nation to abandon several policies in the tech industry.

Like any other war, it also has its casualties. A study from the US-China Business Council revealed a peak loss of 245,000 jobs among US businesses. However, the scaled-back tariffs were seen as a positive stimulus that would recover 145,000 jobs by 2025.

Escalating Russia-Ukraine Conflict

Another longstanding conflict that would ultimately set the tech job loss in motion was the conflict between Russia and Ukraine. In February 2022, Russia started advancing and occupying parts of Ukraine.

Once tied under the banner of the USSR, Russia and Ukraine shared a turbulent history after the dissolution of the Soviet Union. Certain episodes include the mysterious death of Viktor Yushchenko, a western-oriented presidential candidate. His opponent, the Kremlin-backed Viktor Yanukovych, won an election widely dismissed as fraudulent.

Their current escalation, however, can be traced back to 2008, when NATO started considering Ukraine as an extended addition to the group. Russia effectively blocked it.

Shortly after the 2022 advance to Ukrainian soil, sanctions from the international community effectively disabled the once-towering Russian economy. On the other hand, about 80% of Ukrainian IT companies managed to secure new deals during the war.

Completing the Stage for a Massive Layoff

All the above events created the perfect storm for the ongoing tech layoff. The first is the direct impact of the pandemic. The lack of in-person activities severely heightened remote activities. This, in turn, buoyed tech companies, even boosting profits in most cases. To meet the inflated demand, hiring became necessary.

However, as the lockdowns died down, so did the need for these hired professionals. Budget cuts and large-scale reorganization efforts soon replaced record-level salaries for top talent and incredibly cozy work arrangements.

Additionally, certain entry-level positions were immediately identified as being easily replaced by multi-functional employees or automated solutions.

On a macroeconomic scale, factors such as the increasing inflation rate underpinned downsizing decisions. This, in turn, is caused by disruptions in the global supply chain because of ongoing conflicts. Whether it’s rare earth metals from China or Russia cutting down gas supplies to the rest of Europe, international conflicts create waves that affect even the smallest of businesses.

Adapting to the Changing Landscape

Despite the seemingly grim future that the job layoffs paint, tech visionaries see this as a necessary and inevitable setback to prevent worse economic challenges down the line.

Google and Alphabet CEO Sundar Pichai summarized the 12,000 Google layoffs as “a difficult decision to set us up for the future.” This comes after a “rigorous review” that supposedly realigns the organization with its priorities.

“As an almost 25-year-old company, we’re bound to go through difficult economic cycles. These are important moments to sharpen our focus, re-engineer our cost base, and direct our talent and capital to our highest priorities,” the 50-year-old tech exec explains in a message to Google employees.

A continuing trend of layoffs from late 2021 well into the start of 2023 means that qualified professionals are now looking for new positions to fill. However, the US Bureau of Labor Statistics showed data on the changes in the tech industry. While it dipped from its pandemic-period peaks, employment levels remain well above the pre-pandemic levels.

However, companies streamlining their teams doesn’t mean a permanent loss of opportunity. Rather, the shift has prompted a realignment of what companies need from tech professionals moving forward.

“We are seeing all industries hiring developers because they need to continue to support or further develop the technology that they have,” explains Robert Half’s Regional Director in Texas, Thomas Vick, in a statement.

Developers and administrators remain in demand because of continuing requirements related to digitalization, cloud migration, and security. This creates a growing interest for current tech professionals to shift specializations or even for non-tech people to take tech courses such as those focusing on cloud computing.

Final Word

Companies are now starting to normalize and streamline after the pandemic hiring spree. Similarly, economies are starting to adapt in the face of dragging international tensions. Soon enough, the tech industry will have turned its head in a different direction. With it, new opportunities will arise.

To help you transition to the future of tech, check out Yellow Tail Tech. This EdTech company offers programs designed for people with little to no technical backgrounds to get up to speed and land their first job in the IT industry. Book a 10-minute intro call with our Enrollment Advisor to learn more.

Share via

Silvana Zapanta

Sil brings a wealth of experience to her writing and editing projects. After nearly a decade guiding college students in research and communication, she shifted her focus to freelance writing and editing. Her passion for education continues through volunteer work, where she empowers others by teaching research and writing skills.

Related Articles

Stay Informed with Yellow Tail Tech:

Subscribe for Latest Updates & Transformative IT Insights

yellow curve line
Yellow star
three zigzag lines
Illustration of a woman with a suitcase, accompanied by a notice that Yellow Tail Tech serves and enrolls only US residents