IT Career Guide

Dissecting tech layoffs

Dissecting Tech Layoffs: Understanding the Causes and Implications

The tech industry witnessed a substantial surge of layoffs in 2023, impacting 219,962 individuals as of the latest Layoffs.fyi report. Widespread layoffs have left career changers in the tech industry anxious about their dwindling opportunities to transition into new roles. But should these numbers be a cause for alarm? 

This article delves into the reasons behind the layoffs and their implications. Through careful analysis of prevailing trends and valuable insights, we will attempt to shed light on the job outlook for tech professionals amidst the tech layoffs. 

Reasons Behind Tech Layoffs: Unveiling the Causes

Since the initial surge of tech employee layoffs began a year ago, the numbers have been alarming. According to Layoffs.fyi, a startup that tracks tech layoffs since COVID-19, the scale of these layoffs has been substantial.

In June 2022, 196 companies laid off a total of 18,144 tech professionals, which was three times the number of layoffs from the previous month. However, the largest wave of layoffs occurred in January 2023, with 273 companies letting go of a staggering 89,554 employees. According to Layoffs.fyi’s data for 2023 alone, 873 tech companies have already laid off a total of 219,962 workers, nearly doubling the numbers from 2022, when 1,058 tech companies laid off 164,709 workers. Remarkably, these figures are only for the first half of 2023.

But why are these companies laying off employees?

Forbes and Q.ai (via another Forbes article) listed the following reasons for the tech layoffs:

  • Cost Reduction and Economic Considerations: Big tech companies engage in layoffs to reduce costs and optimize expenses during a global economic slowdown, potential recession, or challenges in stock values.
  • Strategic Shifts and Business Priorities: Tech companies prioritize business strategies such as investments in AI companies and automation, leading to layoffs in certain job roles as the focus shifts towards AI technologies and resource allocation.
  • Hiring Policy Adjustment: Layoffs occur as companies wind back hiring policies implemented during the pandemic, following a hiring spree that resulted in bloated payrolls.
  • Financial Targets and Efficiency: Companies aim to meet financial targets by cutting longer-serving employees with higher salaries and optimizing workforce expenses.
  • Automation, Resource Allocation, and HR Functions: Automation replaces certain HR functions, reducing the need for HR staff, while companies cut back on recruitment to allocate resources effectively. This impacts HR departments, accounting for a portion of the layoffs.
  • Copying Behavior and Investor Expectations: Some tech companies lay off employees due to a tendency to imitate other companies’ actions. The emphasis on revenue per employee and investor expectations also influences downsizing choices.

Identifying the Vulnerable: Who Is Being Laid Off?

During tech industry layoffs, specific roles and individuals are more likely to face job cuts. Before getting overly concerned about the layoffs, it’s important to understand who will be affected. Fast Company reported insights from Layoffs.fyi and ZipRecruiter, providing an overview of those who are vulnerable.

  • Sales, Recruiting, and HR Roles: Around 20% of laid-off tech workers are in sales positions, while recruiting and HR roles are disproportionately impacted given their size. Many companies have laid off 50% or more of their recruiters and HR professionals.
  • Marketing and Sales Professionals: During recessions or economic challenges, marketing and sales professionals in tech companies are typically more affected than revenue-generating departments. 
  • Tenure and Seniority Levels: Newly hired and long-term employees are at higher risk of layoffs. Based on the “last-in, first-out” principle, recent hires may have less defined roles, lower productivity, or weaker loyalty compared to their more experienced colleagues. Long-tenured, high-paid employees may also be targeted to reduce costs.

The Major Conundrum: Job Losses and Talent Shortage

Layoffs in the tech industry have broader implications beyond individual companies. Low employee engagement and poor customer service often result from low workforce morale and job security. Layoffs can disrupt the job market, leading to more competition for jobs and changes in industry dynamics.

Tech layoffs present both immediate challenges and future opportunities for those affected. Despite job losses and financial uncertainty, there is still a high demand for tech skills. Laid-off workers can explore new career paths in industries like healthcare, finance, retail, or manufacturing. Adaptability and resilience are essential for navigating the evolving job market and embracing new opportunities.

While we were preoccupied with the layoffs, we overlooked the larger picture: there is a global shortage of talent, including tech talent.

People Are Losing Jobs; Employers Cannot Find Talents

Despite reports of surging tech layoffs, many companies are still having difficulty finding tech talent. According to Forbes, many companies have hired individuals laid off by tech giants. 

Indeed, Fast Company said those who were laid off had a “soft landing,” with 37% securing new employment within one month and 42% finding another job within three months. However, Forbes stressed that it is still insufficient to resolve the shortage. 

According to another Forbes article, there has been a global shortage of skilled workers in the tech sector for several years. The pandemic-driven tech boom has further exacerbated this shortage, despite recent layoffs. 

The layoffs could be seen as a reaction to overhiring during the pandemic tech boom. Companies are preparing for a potential recession and economic uncertainties by tightening their belts. However, the tech labor pool is still growing. Projections suggest that the IT job market will continue to expand in 2023, although at a slightly slower pace than the previous year. According to Janco Associates and cited by Forbes, the tech unemployment rate decreased to 1.8% in December. This rate is lower than the national unemployment rate. As such, there is still demand for tech professionals, and many laid-off software engineers find new jobs within a few months.

Despite ongoing layoffs, there is a paradoxical situation where there remains a strong demand for tech talent in various industries. Non-tech companies seek skilled tech workers, and job listings for tech roles are no longer limited to tech companies. 

Opportunities Beyond Layoffs

The increase in layoffs doesn’t imply a lack of job opportunities for tech professionals. In fact, according to the Bureau of Labor Statistics, the job outlook for computer and information technology occupations is projected to increase by 15% over the next decade. This applies to most tech professionals, particularly information security analysts and software developers. However, programmers have a negative job outlook, as shown in the table below. 

Job TitleJob outlook
Web Developers and Digital Designers23%
Software Developers, Quality Assurance Analysts, Testers25%
Network and Computer Systems Administrators3%
Information Security Analysts35%
Database Administrators and Architects9%
Computer Systems Analysts9%
Computer Support Specialists6%
Computer Programmers-10%
Computer Network Architects4%
Computer and Information Research Scientists21%

Although the tech industry may no longer possess the same exclusive allure it once had, tech workers can transition to different industries and experience comparable benefits, salaries, and flexibility. Tech talent now has opportunities beyond Silicon Valley. Finding a successful and stable career in tech now is a matter of knowing where to look. 

Exploring the Non-Tech Industry

The demand for technical professionals extends beyond the technology sector. Non-tech industries are realizing the significance of technology and actively seeking individuals with tech skills to lead digital transformation and innovation. This trend creates new career opportunities for tech professionals in various sectors.

The Economic Times cited Great Learning as saying that 47% of their placed learners had found tech roles in non-tech companies. Non-tech industries highly appreciate and offer opportunities for career growth and specialization in tech skills. 

In fact, outside of the computing industry, the following, according to the BLS, are the top employers of various tech professionals:

  • Management of Companies and Enterprises
  • Management, Scientific, and Technical Consulting Services
  • Scientific Research and Development Services
  • Credit Intermediation and Related Activities 
  • Advertising, Public Relations, and Related Services
  • Federal Executive Branch 
  • Colleges, Universities, and Professional Schools

Other industries that tech professionals should explore are:

  • Healthcare
  • Retail
  • Education
  • Finance
  • Media and Entertainment

The digital transformation is blurring the lines between tech and non-tech industries in terms of tech roles, offering tech professionals the chance to explore alternative paths. 

Embracing New Horizons

While there has been a surge in tech layoffs, it’s important to view them as a temporary setback rather than a limitation on career prospects. 

The demand for tech talent remains high, and the tech labor pool is growing. Tech professionals can explore diverse industries that value their skills, even though certain roles may be vulnerable. To succeed in the changing job market, it is crucial to adapt, seize opportunities, and upskill. 

Tech professionals can navigate layoffs and find promising careers beyond the traditional tech sector by staying informed, leveraging transferable skills, and embracing digital transformation.

Yellow Tail Tech offers guidance and reassurance to individuals exploring new opportunities in the world of IT. Book a 10-minute intro call with our Enrollment Advisor now!

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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.

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