Google laying off 12,000: What's the cause behind these tech companies downsizing?

Photo by Pawel Czerwinski on Unsplash  

On January 20, 2023, Sundar Pichai, Google's CEO, sent out an email to the company’s staff announcing that 12,000 employees will be laid off. In his email, Pichai detailed how he was “deeply sorry” to the workers that will be let go and that it was a “difficult decision to set [the company] up for the future.” He stated that he takes “full responsibility for the decisions that led [them] here” and as a result, the company will offer U.S.-based employees 16 weeks of severance pay plus two weeks for each additional year they have worked at Google.

However, Google is not the only tech giant laying off its employees by the thousands. The company’s actions are in line with those of Microsoft, Amazon, and Meta, who have in total laid off 48,000 employees just this month. According to Forbes’ layoff tracker, more than 120 large U.S. companies, including tech startups, major banks, manufacturers, and online platforms, have cut nearly 125,000 employees since the beginning of June when fear of recession began to rise. The explanation of this pattern of downsizing can be narrowed down to a couple reasons: the changing scope of the business world as the pandemic comes to a close and fears of recession. 

During COVID-19’s peak, average brick-and-mortar stores across America were forced to close and companies had to transition into a completely virtual setting. Due to the dependance on the internet heightening, many tech companies capitalized on their period of dramatic growth and went on a hiring spree over the last few years— Google increasing their headcount by 20% since 2017. However, as the country attempts to transition back into normalcy, companies are starting to feel the repercussions of their actions. Evercore ISIS analyst Mark Mahaney said Alphabet's record-high headcount had created major margin risk going into fiscal 2023. According to Mark Shmulik, a Berstein analyst, the job cuts could save the company $2.5 billion to $3 billion in costs. With there being a 27% drop in profit last quarter compared to the year before, Pichai admits that Alphabet would need to reduce expenses and hiring, stating that Google “hired for a different economic reality than the one [they] face today.” With inflation hitting a 40-year high this summer, gas prices soaring to extremes, and the Federal Reserve hitching up house interest rates to combat the abundance of money in circulation, economists warn of a nearing recession. Thus, in order to protect itself, the company has not only laid off much of its workforce, but also reduced its expenses by shutting down Stadia, discontinuing Pixelbook laptops, and more.

Yet, while the layoff numbers are significant, John Blevins, an adjunct professor at Cornell University’s business school, stated that their impact on the affected staff is not as severe as it may appear. He believes that the laid-off workers will easily find new jobs, most likely at smaller tech companies, due to their valuable skills and experience from working at a big firm. However, this does not provide much consolation for the affected employees. The Alphabet Workers Union has spoken out, stating that the company's leadership taking "full responsibility" for the layoffs is inadequate. The Union said, "it's appalling that our jobs are the first to be cut, just so shareholders can see a few more points in a chart next quarter." 

Thus, despite being a technological giant, even Alphabet is not immune from the looming recession and must take action to buffer the effects that they foresee coming, especially after their mass hiring. With so many of these technological giants laying off their staff and their employees in constant worry over their employment status, only the future will tell when this pattern of downsizing and era of uncertainty will end.