What Silicon Valley lay-offs mean for the future of tech

Twitter employees have found themselves locked out of their offices with no explanation, another sign of the chaos that has occurred since Elon Musk took charge of the company last month.

Staff were told that the company was “temporarily closing our office buildings” and would reopen them on Monday. The latest news follows reports that hundreds of employees rejected an ultimatum from their new owner that they sign up for “long hours at high intensity” or quit.

The hashtags #RIPTwitter and #GoodbyeTwitter are currently trending on the platform, with many long-term users bidding farewell to the 16-year-old social network.

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Twitter is just one of several tech companies headquartered in California’s Silicon Valley that have made staff redundancies at an unprecedented rate over the last few weeks. Mark Zuckerberg’s Meta (formerly Facebook) has also slashed its headcount in the run-up to Christmas as the global financial outlook continues to cause alarm in the sector.

What has happened?

Around 45,000 tech employees have been laid off as of October this year, reported Firstpost. “While some tech giants are going all out laying off their employees, many have frozen or confirmed a slowdown in hiring to cut budget spending in anticipation of a recession.”

“Meta Platforms, the parent company of Facebook… announced it would eliminate 13% of its workforce, amounting to more than 11,000 jobs”, said Rob Garver at VoA.

But despite the bad news for employees, “Meta’s share price, which had plunged from more than $345 last November to below $89 last week, got a boost from the news.” Shares in Meta jumped back up above $100.

After cutting thousands of jobs, Meta CEO Mark Zuckerberg announced the company was “keeping email addresses active throughout the day so everyone can say farewell”. His gesture “did little to ease the pain”, said Katie Prescott in The Times, with words like “brutal”, “heartbreaking” and “devastating” echoing “across the social media posts of fired staff”.

Elon Musk, meanwhile, cut 3,750 jobs from Twitter following his takeover on 28 October. While this represents fewer redundancies, it is a comparatively larger proportion of the company’s workforce, at 50%.

The widespread job cuts at two of America’s largest tech companies follow a trend established earlier this year. In 2022, “other tech firms, including Seagate, Snap, Intel, Netflix, Shopify, Lyft and others have either cut jobs or restricted hiring”, said Garver.

Why did it happen?

The pandemic is largely to blame for the sudden jobs cuts across the technology sector, said Prescott. “As they overhired during the boom time of the pandemic when the industry expanded rapidly, now they are overcompensating the other way.”

During the two-year period that saw lockdowns across the world, the tech sector grew and companies hired more staff to accommodate that growth. Meta, for example, hired 27,000 people during the first two years of the pandemic and a further 15,000 this year.

According to Prescott, “technology businesses have… experienced a sharp reversal in fortunes from being pandemic winners to facing the reality of a gloomy economic outlook, soaring inflation, rapidly falling consumer confidence and rising interest rates”.

What happens next?

The dramatic change in the employment landscape of Silicon Valley led to technology reporter Kari Paul asking in The Observer: “Is Silicon Valley’s golden era coming to an end?”

“Nervousness is palpable among the bright young things in the technology industry,” said Prescott, “as the rising number of job cuts shatters any lingering perception that the sector was bulletproof.”

Those “seeking other employment in the tech sector will enter a challenging environment” as a result of the “sudden layoffs of thousands of their fellow workers across the sector”, said Garver. There is no guarantee these former employees will easily find work elsewhere.

Meanwhile, job cuts are expected to continue across the sector. Mark Sweney reported in The Guardian that the billionaire hedge-fund manager Christopher Hohn had called for Alphabet, the company which owns Google and YouTube, to cut costs. Hohn is a major investor in Alphabet and the billionaire believes the company’s employees are “paid too much and its workforce should be drastically cut back”.