What Does it Mean When Big Tech is Laying Off Staff During a Labor Shortage?

We’re used to regular announcements of massive investments, billion-dollar valuations, and endless growth from Silicon Valley. But right now, the previously indestructible tech sector is talking about hiring freezes and rounds of mass layoffs.

Investors are pulling back, fearing an economic slowdown or even a recession amid rising inflation and a cost-of-living crisis, and tech companies are feeling decidedly less optimistic.

There are layoffs and hiring freezes all over the place. Meta, Netflix, and Salesforce have all announced hiring freezes; Uber cites a “seismic shift” in the market as its reason for cutting back on hiring and other costs; and PayPal is laying off 80 staff at its San Jose headquarters.

Meanwhile, cryptocurrency exchange Coinbase cut 18% of its workforce, losing 1,100 employees, with CEO Brian Armstrong admitting the company “grew too quickly.”

Perhaps this tells the story. A decade of unprecedented growth had to slow down at some point, and tech has likely lost a little of its “shiny and new” appeal. As digitization becomes more ubiquitous in every part of our lives, new tech innovations are seen more as utilities than as exciting new gadgets.

Tesla’s move to get rid of 10% of salaried workers is particularly interesting, as CEO Elon Musk has said none of the 10,000 cutbacks would be the factory workers actually building the cars.

This points to a fascinating juxtaposition worth exploring further.

Tech Layoffs Amid a Labor Shortage for Hourly Workers

As tech giants jettison their unwanted white-collar workers, retail stores and restaurants can’t hire quickly enough. The current labor shortage follows the Great Resignation of 2021, which saw workers quitting in record numbers.

Hospitality and retail staff were fed up with rude and even abusive customers and a lack of benefits despite working through the pandemic on top of the usual low pay and unsociable hours.

With companies like Walmart handing out bonuses to employees to stay over summer and McDonald’s even paying candidates to show up for interviews, the tide has turned in favor of jobseekers in the industry. Suddenly, workers have more bargaining power.

We’re left with a previously buoyant tech sector letting knowledge workers go but retaining hourly workers and a labor shortage among hourly employees in frontline roles. But there’s another novel factor playing a part: the unrelenting rise of automation and its impact on the workforce.

The Impact of Automation and AI

Artificial intelligence (AI) and automation, so beloved by the tech giants, may have their own role to play in the dichotomy we’re seeing. Although automation threatens to take some hospitality jobs, such as self-service kiosks and voice recognition at the drive-thru that are reducing the need for front-of-house staff, there are key functions that tech is never likely to replace—namely, providing genuine human interaction.

There are more applications for an AI takeover in roles that require a college degree. Software is already automating large swaths of the legal profession, and AI is diagnosing patients before they see a doctor. Better software and data systems are transforming HR and finance and even automating some aspects of coding—all of which are relevant to the office-based roles at tech companies.

Meanwhile, the places where AI struggles to compete with us fleshy humans are in face-to-face interactions and situations that require empathy and understanding, many of which come into play in the very restaurant and retail settings where employers are struggling to fill positions.

Can an algorithm’s smart suggestions really compete with the genuine smile, wit, and personalized recommendations of a salesperson? And are we ready for robot waiters to completely take over for service staff? Whether or not operators are ready, are customers?

As AI and automation sweep through every industry, roles in which genuine human interaction is required are irreplaceable. Despite being the playthings of Big Tech, AI and automation could have a role in exacerbating the diverging labor trends between office-based and manual roles.

Upskill Workers to Ride Out the Storm

The labor market currently has two job opportunities for every unemployed person. Even if the market shifts back toward employers’ favor as a recession looms, skill shortages that were impacting hiring before the last recession are still in effect.

Although the Big Tech layoffs might be unsettling for coders, data heads, and executives at tech companies who previously felt secure, they should remember that highly skilled workers are always in demand.

Jobseekers and those in fear of losing their jobs should keep skilling up to give them the best chance of riding out any economic downturn.

Employers should be motivating staff and offering opportunities to learn new things and progress or risk losing their best assets at the worst-possible time.

AI and automation only threaten the jobs of retail and hospitality workers if they are simply mindless order-takers. Proactive salespeople and servers who go above and beyond are immune to the threat of their jobs being automated.

To hold on to your best assets, incentivize them to perform outstanding work that a robot couldn’t match. That’s what will keep them motivated to stick with you and keep performance levels high for the long term.

Andrew Duffy is the CEO and Cofounder of SparkPlug, an incentive management platform for frontline employees. Today, SparkPlug works with more than 1,000 businesses across the United States and has delivered more than $1 million in supplemental income to hourly workers. 

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