What really changed things was the end of ZIRP [1] and even then it was opportunistic. Labor costs are a massive cost for tech companies. They have continually tried to suppress wages. In the 2000s, it was the anti-poaching agreement between Steve Jobs, Eric Schmidt and others. In the 2010s, high growth ahnd zero interest meant labor costs continued to balloon.
But then Covid came along and was a massive opportunity. A few companies may have needed to do layoffs but that created the opportunity for everyone else. Big Tech just went full Corporate America with a page straight out of Jack Welch: fire the bottom 5-10% every year. Call it "layoffs". It's a direct pay decrease for those who remain (who get assigned the work). Those are still there won't be asking for raises because they're now afraid of their jobs.
Very little of this was ever necessary. None of the big tech companies ever came close to making a loss. They've remaining insanely profitable, in total and on a per-worker basis. At different times Google's per-worker profit has approached or exceeded $1 million.
The other factor is these companies eventually reached their size limits where antitrust stopped them making any more significant acquisitions.
Consider the timing: this change came in 2017. Where were the mass layoffs in 2018? 2019?
Also, the 2017 tax cuts contained a massive tax holiday for the repatriation of foreign profits.
Mass layoffs are simply wage suppression. It's the end state for any company that can't keep growing the way the market demands: eventually it comes down to cutting costs to make those quarterly profit targets. And in that, they sow the seeds of their own demise.
> Big Tech just went full Corporate America with a page straight out of Jack Welch: fire the bottom 5-10% every year
Plenty of "big tech" already did it. Microsoft could not be more famous for stack ranking dating back to the 90s. Amazon have long had that kind of culture too.
Big tech companies are both doing mass layoffs AND hiring. How does this fit the narrative that the tax change is at least in part responsible? The new hires still have the same deduction issue, right? So what impact does this really have?
Think of it this way: if this passes, will the layoffs end? Or reduce? Absolutely not. All this does is give line the pockets of shareholders. That's it.
I'm a big fan of tying certain benefits to NOT doing layoffs. This can include:
1. You get this deduction only if you've fired fewer than 1% of your workforce in the last calendar year;
2. You don't get to sponsor for an H1B if you've conducted ANY layoffs in the last calendar year; and
3. The tax deduction only applies to unionized workers.
And while we're at it, let's roll back this ridiculous tax structure where IP can be "sold" to a subsidiary in Ireland and then royalties paid.
That's a solvable problem and probably already solved. Fire more than a certain threshold of your employees over a certain period for any reason and it's a layoff in effect, say 3% over 12 months.
I feel like I'm taking crazy pills reading this article. To me, the most obvious and earliest case of mass tech layoffs was the Twitter 50% layoff by Musk. The whole lines written fiasco. The lack of mention anywhere is gaslighting me. Couldn't that have been the precedent as well? We know the market hanged on his every word (at least in 2022).
What really changed things was the end of ZIRP [1] and even then it was opportunistic. Labor costs are a massive cost for tech companies. They have continually tried to suppress wages. In the 2000s, it was the anti-poaching agreement between Steve Jobs, Eric Schmidt and others. In the 2010s, high growth ahnd zero interest meant labor costs continued to balloon.
But then Covid came along and was a massive opportunity. A few companies may have needed to do layoffs but that created the opportunity for everyone else. Big Tech just went full Corporate America with a page straight out of Jack Welch: fire the bottom 5-10% every year. Call it "layoffs". It's a direct pay decrease for those who remain (who get assigned the work). Those are still there won't be asking for raises because they're now afraid of their jobs.
Very little of this was ever necessary. None of the big tech companies ever came close to making a loss. They've remaining insanely profitable, in total and on a per-worker basis. At different times Google's per-worker profit has approached or exceeded $1 million.
The other factor is these companies eventually reached their size limits where antitrust stopped them making any more significant acquisitions.
Consider the timing: this change came in 2017. Where were the mass layoffs in 2018? 2019?
Also, the 2017 tax cuts contained a massive tax holiday for the repatriation of foreign profits.
Mass layoffs are simply wage suppression. It's the end state for any company that can't keep growing the way the market demands: eventually it comes down to cutting costs to make those quarterly profit targets. And in that, they sow the seeds of their own demise.
[1]: https://en.wikipedia.org/wiki/Zero_interest-rate_policy