Tech layoffs: Are we out of the storm yet?: Opinion (UAT 2)

Navigating the world of work is no easy task these days. On top of successive waves of tech disruption in recent years, the looming onslaught of artificial intelligence (AI) has created additional uncertainties for everyone: the worker, companies and policymakers.

Consider some of the pressing questions in search of answers: Has the flood of job losses in the technology sector that started in 2022 and continued through the first quarter of 2024 begun to ease a bit? How long will the lull last, if there is one, and before the next wave starts as AI and other technology trends gain momentum, and seep into all corners of employment? How to limit the disruptions to industry, and society if and when that happens?

On the face of it, the stream of layoff news may look as though it hasn’t quite ended. This month, ByteDance is slashing some 450 jobs – or about 9 per cent – of its Indonesian e-commerce operation. Xiaohongshu, sometimes called China’s answer to Instagram, apparently is in shed-jobs mode as well. The same for PayTM, one of India’s best known new economy companies.

Singapore has had its share of tech layoffs. Lazada, Google and Amazon were among those that have culled its workforce here in recent months.

Globally, the year has already seen some 98,000 job cuts across 326 technology companies, according to independent layoffs tracker Layoffs.fyi.

That compares with 263,180 jobs shed in 1,191 firms in 2023, and 165,269 across 1,064 firms in 2022.

While attention has focused on the cuts at the big name firms such as Amazon, Microsoft and Zoom, smaller-size start-ups have not been spared. Many have shut shop – in the US, in Israel, India, and elsewhere – as funding dries up in a new climate of caution. Some are relocating staff to cheaper locations in Eastern Europe or South America in order to shave costs and survive.

The headline-making numbers don’t necessarily tell the full story. There may well have been more job cuts that escaped public notice through what the industry calls “silent layoffs”, that is, forced attrition that is not revealed in a public manner, or done in a series of moves so as to preserve company image and staff morale.

There is also a form of backdoor culling of staff numbers that has emerged in discussions in chat rooms focused on human resources issues: Some employers, reluctant to be seen firing people, may be using unpopular RTO – return to office – instructions as a way to pressure staff to leave jobs.

There is evidence though that the number of layoffs may be finally slowing after what some in the industry refer to as a “rotating recession” – a sort of cleansing process that should improve company performances in the months ahead. Figures offered by TechCrunch.com suggest that from 19,350 tech company layoffs in January, the figure fell to 9,882 in May after peaking at 22,153 in April.

AI-generated churn

So, is the worst behind us? Not quite. And the reason for the volatile jobs outlook ahead has to do with AI.

First, the good news. Wired magazine says demand for specific types of jobs is rising. For instance, openings for AI roles or those that require AI skills made up 12 per cent of all tech job offerings in May – the largest percentage in six years – it reported recently, citing CompTIA, a non-profit trade association for the US IT industry.  

But further down the road AI could also lead to greater churn and job cuts as firms redeploy resources.

PwC’s 27th Annual Global CEO-Asia Pacific Survey 2024 suggests that 26 per cent of Asia-Pacific CEOs – more than a quarter – predict a reduction in headcount due to generative AI.

To be sure there are counter currents in this broader shift among companies to adapt to tech changes. For instance, Bain & Co reported in 2023, amid a swirl of news about large-scale tech layoffs, that demand is strong for tech workers at non-technology businesses such as construction and hospitality. Demand in these sectors is outpacing demand at tech businesses as companies step up the use of technology. That trend seems to be holding.

I am aware of one techie who got laid off earlier in 2024 from a Chicago start-up and then found employment with a prominent supplier of hardware and tools, and industrial materials – in its tech department. Workers with experience in Web 3.0, AI and cyber security are much sought after. 

Nevertheless, what we are seeing may be just a breather because the tornado of change has by no means run its course.

This week, the AI-chipmaker Nvidia powered past Microsoft to take the title of the world’s most valuable company, reminiscent of the days networking company Cisco, in March 2000, clinched that honour during the heydays of the dot.com boom.

The AI factor is going to persist for years to come, with its attendant effects.

My own conversations with technology leaders in Asia and the US suggest that the second half of 2025 – just over a year away – is when the AI cyclone will likely hit employment in a big way. And from the looks of it, Gen Z – people born after 1997 – are the most vulnerable to being pushed out by AI. In February, workplace resource platform intelligent.com startlingly said a third of Gen Zs are planning blue collar careers.

Is that a case of hitting the panic button prematurely? It might be. Tech jobs may not be disappearing so much as undergoing rapid change.

According to Deloitte’s Navigating the Tech Shortage paper, the US tech workforce is projected to grow at twice the rate of the overall US workforce over the next decade. 

The consulting company cites reports that estimate that the demand for tech talent will grow to 7.1 million tech jobs by 2034 in the United States, from an estimated six million in 2023. And despite high-profile tech sector layoffs, it says, the unemployment rate among tech workers remains significantly below the unemployment rate for the general workforce. 

If accurate, that should be reassuring for the wider world that is coping with the tech swirl. The challenge then is to stay right-skilled and adaptable, through the arc of the working life. 

Mr Vamsi Krishna Duvvuri, EY’s head of technology, media and communications, recently said the world should brace itself for a “continuous cycle of strategic workforce realignment, characterised by simultaneous layoff and hiring, and not necessarily in equal volumes.”

Short half-life

That makes sense. A recent Harvard Business Review study found that the “half-life” – the period of time for something to reduce to half of its initial value – of some technology skills is as low as 2½ years, which could be further shortened by advances in generative AI.

This challenge of staying current, if not ahead of the game, will prove impossible for the worker alone to handle, even as the principal responsibility to do so possibly rests with him.

The emerging environment calls for not just the consistent mapping of emerging demand for tech skills but also ensuring an adequate pipeline to fill those demands. This part of the challenge can only be met by companies working closely with the education sector, and needless to say, governments and unions.

Workers, particularly, need to do their part and stay agile and flexible. For instance, studies have shown that many tech workers are reluctant to take on managerial roles as a part of their responsibilities. In the evolving landscape, such attitudes could prove costly.

At the other end of the equation, companies, too, need to have a better understanding of the full range of skills that reside in an employee – not just what a particular job function, say systems integrator, may call for. That flexibility will help bring more flexibility to staff deployment, and team building. Hopefully, curb the C-suite’s reflexive instinct to press the redundancy button too rapidly as well. Who knows, AI may even come useful to do predictive modelling for skills deficiencies.

Writing in these pages recently, NTUC deputy secretary-general Desmond Tan offered what I thought was sensible advice: the importance of redefining job roles via task enrichment, job enlargement, rotations and flexible workforce arrangements. As he put it, if the workforce remains relevant, businesses will, too.

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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