Romain Rouillard 10:00 am, March 24, 2023Since last year, the American tech giants have been multiplying redundancy procedures even though their economic situation does not call for concern. But the more uncertain economic context and fears expressed by the financial markets around the attractiveness of the sector, lead to these redundancies.
12,000 layoffs at Google, 18,000 at Amazon, more than 20,000 for Meta, parent company of Facebook and Instagram... For several months, the workforce of American tech giants has been undergoing drastic cuts, motivated most of the time by budgetary reasons. And the trend seems to be accelerating since the beginning of 2023. In January, Microsoft announced in turn the elimination of 10,000 positions around the world and Elon Musk, new head of Twitter, continued the clean up within the social network that has already lost more than 70% of its employees. How to explain such an upheaval?
A lack of anticipation
Guest of La France bouge on Europe 1 Wednesday, Corine de Bilbao, president of Microsoft France, gives a first explanation. "All tech companies recruited massively at the time of Covid-19. When I say massively, it's in the order of tens of thousands of people, especially to deploy solutions for hybrid work. At one point, we responded to a very strong demand for tech and today, the context is much more uncertain," she notes. A scenario that the sector had not necessarily anticipated, according to the leader. "We have created huge capacities. And then we all hoped that at the end of hybrid work, everything would restart as before and that we would recover all the growth."
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However, various external shocks have abruptly altered the economic situation. "The recession has arrived. There has been an increase in energy prices in Europe, the war in Ukraine and then a recession in all countries of the world," recalls Corine de Bilbao, who promises, however, to proceed only with "voluntary departure plans" in France. A delicate context that has therefore led the GAFAM to make "workforce adjustments". Clearly, the needs of yesterday are no longer those of today.
Sending a message to the financial markets
Explanations that Jérôme Marin, journalist specializing in news, describes as the "official version" of the companies concerned. Without refuting them, he also highlights other factors to decipher the phenomenon. "For me, if they do that, it's not because they're about to go out of business. They are not in catastrophic economic situations but the idea is to reassure the markets because for a year and a half, stocks have fallen a lot and have not risen," he said.
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The war in Ukraine and the resulting inflation, approaching the 10% mark on the other side of the Atlantic, pushed the US central bank to significantly increase interest rates. This will reduce the purchasing power of households and thus lead to a drop in consumption. "As a result, investments in equities have become less attractive," says Jérôme Marin to the extent that their value tended to plummet. "Laying off staff in these companies is therefore a signal sent to the markets that were waiting for savings measures within these companies. It allows them to say, 'We understood and we're making financial efforts.'"
As a result, tech giants have had to abandon many projects while rationalizing the workforce. "Mark Zuckerberg says he wants to 'remove the fat' because within Meta there were managers, then an 'undereat', someone below and finally the employees. He therefore wants to move directly from managers to employees. It is true that sometimes these companies hired too much," says Jérôme Marin.
And contrary to what we observe on the side of Twitter, these dismissals should not harm the security and moderation of content on the platforms concerned. "Twitter is a special case. They were 7,500 at the beginning and they are now only 2,000. For the others, it is quite limited in terms of the percentage of employees fired." Still, in 2022, 150,000 employees found themselves on the sidelines overnight. Nevertheless, according to a study conducted by ZipRecruiter, 79% of them took less than three months to find a position.