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Why the tech industry is culling staff

Big tech has been bleeding jobs for a few years now, after overspending and overhiring during the COVID-19 pandemic in anticipation of profits that never materialized.

Now, according to an internal document obtained by Forbes, following a review of business operations, Amazon is cutting hundreds of employees at its Prime Video and MGM Studios and Audible divisions. And live-streaming platform Twitch (also owned by Amazon) is downsizing staff by 35% in order to “rightsize” the company.

Google also recently laid off hundreds of employees working on core engineering, the Google Assistant product and hardware like the Pixel phone and Fitbit watches, in order to “responsibly” invest in the company’s “biggest priorities and the significant opportunities ahead.” And language app Duolingo reportedly cut 10% of its contract workers in a move toward using more artificial intelligence for generating content.

Kayes, who predicts the industry could see around 100,000 layoffs throughout the year, says the industry is going through a correction and looking for ways to cut costs and maintain profit margins.

“Companies like Google and Amazon, to some degree, they're struggling to redefine their business model,” Kayes explains. “The old ways of business are not working like they once did and they just can't grow at the pace that they did, say over the last decade.”

Kayes offers Google as an example, as like many users, he's found the search engine has become increasingly inundated with advertisements.

“They're really trying to figure out how they can squeeze every advertising dollar onto the eyeballs on the screen — and that, to me, says that the old business model … is no longer working and sustainable.”

The other problem that many businesses are grappling with currently, is that “cheap money” — or loans and financing with lower interest rates — is becoming less accessible, Kayes says.

This is, in turn, slowing down growth as well, since companies can't just burn through cash like they did before.

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Could tech workers start turning away from big tech companies?

Kayes believes there’s still plenty of demand out there for tech workers — but notes big employers might have to work harder to attract and retain employees in the future, as they become more wary of the volatile job market.

A 2023 survey from college career network site Handshake reveals interest in big tech companies could be waning — searches for major tech brands plunged almost 15% for the graduating class of 2023, compared to the class of 2022.

Christine Cruzvergara, Handshake's chief education strategy officer, told Insider this recent class of grads is prioritizing stability in their careers after watching the big tech layoffs unfold.

Kayes also believes major tech companies could be going the same way as banks or consulting firms — where employees work there for about three years and get the experience down on their resume so they can jump ship to another employer.

But there’s a positive light at the end of the tunnel. Kayes is seeing industry workers become more open to other kinds of organizations, such as the government, health care and defense, and smaller, off-radar companies.

Nearly two-thirds of displaced tech workers landed in jobs outside of tech industries, according to 2023 data from LinkedIn.

“I think you're seeing a more, almost democratization of the tech workforce, across a broader set of industries and types of companies,” Kayes says.

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Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.

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