Tech Company Layoffs Surge—Economists Unfazed

This is a free excerpt from one of Shortform’s Articles. We give you all the important information you need to know about current events and more.

Don't miss out on the whole story. Sign up for a free trial here .

Why are tech companies laying off employees? Which tech companies are having layoffs? How do economists explain this issue?

November alone has seen tens of thousands of tech company layoffs, many from large companies like Meta, Twitter, and Amazon. Experts believe that these layoffs are being driven, in large part, by the end of the Covid-19 pandemic and economic uncertainty in the near future.

Read on to learn why economists say tech company layoffs aren’t a major concern for the future.

The Economy of Big Tech

As the world emerges from the Covid pandemic and life returns to in-person normalcy, the rapid increase in tech company layoffs has stunned employees and the wider society. However, the economic impacts—to the technology sector itself, the U.S. economy, and the global economy—are likely to be smaller than people fear.

Well over 100,000 tech company workers have lost their jobs to layoffs this year. In November alone, various tech companies announced around 34,000 layoffs, including 11,000 layoffs by Meta and 10,000 by Amazon. This is part of a larger trend in the technology sector, which has seen share prices fall for much of 2022, including a massive $400 billion drop at the end of October. Some people are worried that the shrinking tech sector is a sign of larger economic problems to come—however, many economists don’t believe that’s the case.

In fact, some experts predict that tech giants, like Meta, Twitter, and Amazon, stalling out will lead to a new gold rush in the tech sector, as their smaller competitors finally get a chance to shine.

Why So Many Layoffs?

To begin, let’s examine what’s causing the layoffs and why big tech companies are struggling in the first place.

Experts believe that there are two major drivers behind the widespread layoffs. First, the Covid pandemic created enormous demand in the technology sector as people moved much of their lives and work online. Now, as people are starting to meet and work in person again, many tech companies (who may have assumed that pandemic life was the ”new normal”) are finding themselves with more employees than they can use.

Second, economic growth—especially in the U.S., where many of the largest tech companies are based—is slow and threatening to get slower. In fact, many economists believe the U.S. is likely to enter an economic recession within the next year. Because of that projection, many companies are trying to reduce spending and build up a financial buffer, which they’re doing in part by reducing their workforces.

The Future of Tech Companies

It’s not entirely clear what the future holds for the tech sector as a whole, but it seems as though the days of “Big Tech” are coming to an end—the companies themselves aren’t likely to close down anytime soon, but their days of exponential growth are finished.

The good news is that, despite nearly 120,000 tech company jobs being lost to layoffs this year, unemployment among tech workers is still quite low. This likely means that the tech sector isn’t shrinking as some people fear; rather, a few large companies created a bubble based on overly optimistic predictions and now the market is correcting itself. Furthermore, now that a few giants aren’t monopolizing the talent pool anymore, smaller companies and interesting new projects have their own chances to grow.

Big Tech Is Setting Big, Green Goals

Aside from the tech company layoffs, the future of big tech also is being impacted by access to energy, especially renewable energy.

Big tech companies are among the biggest energy consumers in the world. In recent years, Amazon, Google, Apple, Facebook, and Microsoft have set ambitious goals to go green—and now, they’re the biggest corporate customers of clean energy in the world. As a result of their influence and sheer volume of energy consumption, big tech is accelerating advances in the clean energy industry.

Because of the volume of tech companies’ energy consumption, the conversion to renewable power is having a big impact on the energy industry, especially in the U.S.

New wind and solar installations in the U.S. hit record numbers in 2020, even though the Trump administration offered little federal support for green energy.

While clean energy is growing, gas- and coal-powered utilities are taking a hit. Some power plants may shutter as demand pivots from fossil fuels to renewable power.

Tech companies will probably start getting involved in energy generation projects. Facebook already took its first step with a solar project last year.

Switching to Clean Energy Is Just One Part of the Solution

Although big tech firms are making substantial impacts by converting to clean power, activists point out that they can do more.

Some tech firms are still supporting oil and gas companies by providing artificial intelligence services that are used for fossil fuel extraction.

Big tech has big lobbying power, but only a small portion of that power is pushing clean energy. In the last two years, just 4 percent of the federal lobbying money from Amazon, Apple, Alphabet (Google’s parent company), Microsoft, and Facebook went to climate-related issues.

Tech companies have focused on using renewable energy and a technology called direct air capture, which pull carbon dioxide out of the air. However, these approaches don’t address the human behavior changes that are also required for substantial environmental improvements.

As tech companies continue to grow in size and power, they’ll have to assess whether their core businesses align with their clean-energy efforts. For example: