The Tech Employment Paradox: Tech Companies’ Own Products Are Causing the Massive Layoffs in the Industry

As widespread layoffs hit tech companies, the impact on the hiring market is on many college students’ minds. So, what has led to these layoffs and where do we go from here?

As more and more tech companies face massive layoffs, college students’ concerns over employment are growing. Over the past 12 months, almost 250,000 employees have been laid off at the biggest tech companies in the world—over 50,000 at four of the tech giants: Alphabet, Amazon, Meta, and Microsoft. This trend is concerning for college students who had internships or full-time jobs lined up for the summer of 2023 and beyond, as many of these corporations are introducing hiring freezes and slowing down campus recruitment programs. The future for hiring is uncertain, but a great emphasis will be to prioritize hiring back the seasoned professionals. This makes it even more difficult for future graduates entering the industry. 

In over a year of widespread layoffs, the impact on educational programs in computer science and STEM has yet to be realized. As we trek forward in what appears to be the largest wave of tech layoffs since the dot-com crash of the early 2000s, many undergraduate STEM programs may begin to see some changes. 

After the dot-com crash, undergraduate computer science departments around the country saw a decline in enrollment. The national percent of undergraduates enrolled in computer science degrees dropped almost 10% in 2000 and 2001. As of 2020, the percentage of students enrolled in computer science around the country is close to 6%. 

It is uncertain whether this era of layoffs and the future rehiring of tech professionals will lead to deferred interest in these degrees. However, the demand for degrees in data science is expected to rise at a rate of over 36% over the next decade according to the Bureau of Labor Statistics. This could lead to some internal departmental shifts that focus computer science departments on more education in data science and machine learning. For example, at Princeton University, perhaps this focus has already begun for undergraduates, as its Statistics and Machine Learning (SML) department saw a 7% increase in enrollment across their course offerings over the past two academic years. This shift may be exaggerated in years to come as the future of tech hiring lies in question as a result of the continued shedding of tech professionals.

Let’s step back for a moment to recognize the key question: how did we get here? 2022 was not another dot-com crash or a 2008 housing crisis. So why are there so many layoffs right now?

As a macroeconomic downturn continues and a possible depression looms on the horizon, many corporations simply need to cut costs. And, less salaries payable is a quick fix to improve profitability. But, still many other companies have other reasons for wide-spread layoffs. The role of middle management is changing and companies are reliant on too many layers of management.

When Elon Musk decided to lay off 50% of Twitter’s workforce in November of 2022, he gave his employees an ultimatum: commit to the new hardcore lifestyle of work at the company – or leave. Many of Twitter’s employees were not actively producing code month over month and only a small percentage of the employee-base were writing new code every week – many of whom are known as individual contributors in the industry. However, they were incentivized to not produce code because, to be promoted to a managerial position at Twitter, employees had to showcase their ability to perform project management duties or similar managerial skills.

This resulted in too many managers and not enough coders – the employees that produced material results for the company. So when Musk overtook the tech giant, he saw this inefficiency and took action to override Twitter from their severe daily losses. Despite his horrific handling of the restructuring, his approach follows a trend across companies big and small – flattening out the management and reducing the amount of layers of hierarchy in the company. 

Companies around the world are beginning to make similar changes to flatten out their business. Digital infrastructure is enabling employees to easily communicate and collaborate with their teams in ways that were formerly performed by a chain of managerial leaders. Until very recently, all chains of information flowed from meeting to meeting or manager to manager,  and eventually reaching those in charge. But with modern digital technology like Customer Relationship Managers (CRMs) and workspaces that are offered by Microsoft, Google and others, information is shared more efficiently and effectively, partially eliminating the need for the many layers of management. These technologies have enabled synergy between the many business units functioning within corporations. In the case of those corporations with recent layoffs, this has eliminated the need for so many managers.

Due to the overwhelming success of management technology, there has been stern debate over middle management and what their role will look like in the future. More and more companies are beginning to flatten out their businesses, big or small. Many of these companies have seen success as cutting out the middle-men enables ideas to flow faster to the top. But, while it is easier for a startup or early-stage company to maintain a flattened hierarchical scheme, larger companies tend to still need a large number of management structures, no matter how useful and synergistic the modern technology has become. As the Economist points out in its article, “Why Companies Need Middle Managers”, not every Tesla factory can realistically get oversight from Elon Musk himself, nor would it be wise for Tesla to do so. If Musk is busy overseeing the factories, then the core business strategy and direction may suffer from the lost time spent on static executive oversight; when it could be spent on branching into new sectors, product development, and business analysis. 

Ideally, a flat business sounds like an efficient scheme: Every employee adds value to the team and all ideas are considered and expedited to the executives. But at scale, the bossless dream of a flat business is a “false utopia”, and one that the current technological innovation does not enable. We need middle management in order to handle all of the core business functions more efficiently, while still adequately addressing each area of the business. 

Workspaces, AI, CRMs, and other software is helping to promote synergy within businesses and their teams, but the core business still needs enough management roles to handle key functioning areas. Still though, companies are finding the right balance between using technology and efficient management, leading to the rise of layoffs across corporations. 
The technology-induced changes to the role of middle management has a direct implication on the executives of tech companies. Take for example a Microsoft manager in charge of sales of their Teams product. He was likely fired because the Teams product was too good at allowing the people who reported to him to easily go right over his head to the people that he reported to. It streamlined the information process for others who had better ideas than he did, and they overtook his position. Thus, for Microsoft, Google, Meta, Zoom, Salesforce, and more, the very products that they have capitalized on have caused the recent layoffs in the industry. As such, the office on cloud may be replacing the physical offices in the clouds. Only the best in tech have their names in the clouds, but the employees at the best companies are the ones being replaced by the product that put them so high up there.