Labor: What’s Behind the Big Tech Layoffs?

By Jonathan Lord

Beneath a Facade of Hard-Times Efficiency, Corporate Greed Drives Tech Exec Moves.

As a business owner, how would you respond to two years of all-time high revenues and profits? If your instinct is to make record-breaking stock buybacks and fire double-digit percentages of your employees, you might be qualified to be a Big Tech CEO. Since the start of 2022, the tech sector has laid off over 200,000 workers, with no signs of slowing down. At the same time, overall layoffs and unemployment have been at their lowest point in decades.

What’s Happening?

Tech executives behind recent layoffs have variously attributed the decision to fire thousands of workers to rising interest rates, over-hiring during the early stages of the pandemic, inflation, and a general decrease in profitability. While some of these factors are at least partially present for some companies, the facts in aggregate paint a very different picture. Rather than a picture of responsible executive teams shepherding their companies through stormy times, we instead see the pursuit of infinitely increasing profits, driving dangerously short-sighted decisions on critical social infrastructure – decisions that affect our entire society made with no democratic input.

Vital infrastructure is run to satisfy the demands of near-term profit maximization.

Alphabet, the parent company of Google, recently announced the largest layoffs of any tech company in this period. They also authorized $70 billion in stock buybacks in 2022, enough to pay all of the laid off workers’ paychecks for over 40 years. It’s not just Alphabet – across the tech industry, companies like Microsoft and Salesforce are seeing some of the highest revenues and profits they’ve ever seen. The key to understanding the panic in the tech industry lies in what they aren’t seeing: high year-over-year growth in the rate of profit. It’s not enough to just make more money than ever before – the rate at which the profits grow must go up and stay up.

The conventional-wisdom response to this scenario is to decrease expenses, and for the capitalist class, no expense is as compressible as labor. Office leases and cloud computing contracts last for years and come with penalties if broken, and server farms are hard to liquidate. But thanks to decades of union busting and corporate lobbying, workers can be eliminated on a whim.

The dark irony is that, for all their brutality, layoffs aren’t even effective. Companies would be punished by shareholders and activist investors for not decreasing labor costs when their competitor companies are doing so, but decades of profitability studies show that actually going through with layoffs tends to decrease the long-term profitability of a company. The main long-term benefit companies secure with layoffs is instilling fear and discipline in their labor force.

However, not all tech companies are seeing record revenues; some are genuinely facing steep decreases in revenue and profitability. These companies tend to be mid-sized or smaller and have outsized portions of their operating expenses covered by debt, meaning the Fed’s interest rate hikes have hit them particularly hard. They may be a leading indicator of things to come for the rest of the economy. Even among these companies, record-high stock buybacks and executive compensation combined with record-low reinvestment and mass layoffs typify the response to economic downturn.

Why Is This a Problem?

Tech companies run some of the most important social infrastructure in the world. Over 90% of internet traffic passes through a cloud provider. Amazon, Microsoft, and Google together corner two-thirds of that market. Companies like Stripe and Square process billions of dollars of payments per day, including payments for utilities and local taxes for cities across the US. All of this vital infrastructure is run to satisfy the demands of near-term profit maximization, rather than the fulfillment of human need.

Take Twitter for example. After Elon Musk’s purchase of the company, he set about reducing operating expenses by firing over half the workforce. Predictably, the number of outages and partial outages across the service have been rapidly rising. While it’s not the end of the world if a social media platform starts having more outages, we can watch the same pattern unfold in other parts of the tech industry as layoffs lead to more and more services becoming unusable or outright shuttered. For example, Amazon has experienced a number of high-profile outages since the start of their mass layoff campaign last year.

On the other end of the labor cost-savings equation are the side effects of pursuing increased automation. Google and Microsoft are currently engaged in an artificial intelligence arms race. They are each trying to stake out a first-mover advantage in developing a new generation of AI that can be used to automate knowledge work previously thought of as impossible to automate – the work of journalists, software developers, legal writers, and so on. The hope is that this automation will drive productivity increases and help bolster the rate of profit.

A number of socially harmful outcomes are already cropping up. Microsoft and Google’s new search chat bots are confidently providing blatantly incorrect information wrapped in the trustworthy guise of the world’s largest information brokers. Meta is using your Instagram posts to train its AI models, and AI image generators are slurping up copyrighted works of art and personal photos alike. Privacy concerns, information integrity, and other social goods are clearly not being allowed to stand in the way of potential profits.

Privacy concerns, information integrity, and other social goods are clearly not being allowed to stand in the way of potential profits.

In the anarchy of the market, companies are punished for long-term planning, but the “optimal” short-term moves – layoffs, buybacks, rushed releases of new technology – can have devastating effects on society. The rewards of increased productivity will not go to the workers using these new AI technologies in their work or to reducing the need of workers to toil across society writ large. The gains will be hoarded to enrich the already wealthy.

What Can We Do About It?

One of the most hopeful trends of the recent period is the rise in worker militancy and unionization, and the tech industry is no exception. Nothing gets built without the workers who build it and there is a rising tendency among tech workers to demand control not just over their working conditions, but the direction and planning of their work.

Employees at Google, Netflix, Amazon, Intel, and many more have gone on strike and walked out to force these mega corporations to grant concessions. While many recent actions have been over bread-and-butter workplace issues like sick days, just as many have been broader in scope, such as the “No Tech For Apartheid” movement in which Amazon and Google employees protested their work being used to support the Israeli military, or the 2018 campaign that successfully prevented Google from renewing an AI program helping the US military operate drones. A refreshingly common focus for recent tech worker movements has been democracy: that technology has been used to concentrate, rather than disperse, control over society. Notably, the Alphabet Workers’ Union (a minority union representing workers at Google and its parent company) lists as part of its mission that workers will “control what we work on and how it is used.”

The small size of the new forces in tech labor stands in sharp contrast to the ambitious scope of our demands. Workplace actions have tended to be organized loosely, without the protection of NLRB-recognized bargaining units and without the target of securing a formal contract with the employer, and certainly not conducted in affiliation with a political party.

Even securing those NLRB-recognized bargaining units in the first place has proven difficult. Individualist consciousness is rife in the tech industry, particularly in more prestigious roles like the full-time software engineer. For decades, the argument has been that if you don’t like your work environment, you have the rare and valuable skills needed to find a new job. This mindset is slowly changing alongside the rise of AI-based automation and ever-larger portions of the American post-secondary education system being dedicated to churning out new tech workers.

Another difficulty in organizing tech workers is the extra danger that H-1B visa holders are placed in. The H-1B visa is a temporary work visa which allows highly-skilled workers to stay in the United States as long as they’re employed by a company willing to sponsor them. Up to 30 percent of some tech companies are made up of H-1B workers. If a citizen-worker is afraid of being fired, an H-1B worker is afraid of being fired and then having their entire family deported. I can speak from personal experience that some of my most passionate coworkers have wanted to join in workplace actions, but ultimately kept their heads down because of the extreme risk of retaliation. Clearly, the fight for immigrants’ rights is also the tech worker’s fight.

On the more directly political side of things, there’s a growing anti-monopolistic trend among progressive Democrats that is best expressed in calls to break up Big Tech. While it’s true that tech companies are bigger than they’ve ever been and are exerting anti-competitive pressures, a more complete solution lies not in simply breaking apart large companies into many smaller ones and playing monopoly whack-a-mole, but in nationalization and democratic public ownership. If the infrastructure run by Big Tech is too important to be left in so few hands, then slightly increasing the number of hands controlling it is a poor substitute for democratic control, particularly when those companies – large or small – would be subject to making decisions under the same market pressures.

There is a utopianism common among tech workers. Much of our work is driven by the urge to eliminate toil. We spend countless hours in interminable debate trying to apply rational planning to everything we touch. Often that instinct is twisted, in the form of capitalist megalomaniacs like the Elon Musks, the Bill Gateses, and the “effective altruists” of the world, who see what is good and what is profitable as being one and the same. But there is also a healthy expression to that utopian urge. We are workers representing one-tenth of the entire US economy, and our role as workers is the starting point for any attempt to change society. If we want to have any hope of avoiding the devastations of capitalism’s cyclic boom and bust cycles and the chaotic disruptions of the unplanned marketplace, we need to take control of our work.

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Are Tech Workers Really Workers?

From “go home tech bro” stickers to the zine spotted at a protest titled “Kill Your Local Techie,” a small but vocal segment of the left sees tech workers as diet-capitalists at worst, and class traitors at best. Often these ideas are prompted by a misguided analysis of very real problems exacerbated by tech companies.

For example, many noted during Amazon’s 2018 search for a city to host its new headquarters that the project would spur a new wave of gentrification. A strong response to the project would involve heavy taxation, rent control, and the construction of large amounts of high-quality public housing. But the left is demoralized and disorganized, so instead we saw the above stickers and zines. If we’re to have any hope of contending with the world that tech companies have forced upon us, we have to understand the role of the workers in the industry.

Tech workers are in an interesting place economically. Pay ranges from relatively high to incredibly high. Most positions in the industry don’t require specialized degrees or certification, unlike with doctors or pilots. The high pay has little to do with organized struggle or unions, unlike with longshore workers or UPS drivers. Tech workers often have a considerable degree of autonomy in choosing how to carry out their work.

And yet, the basic relations of being a worker remain. The amount of revenue generated by a software engineer is typically many times what they get paid ($1.5 million a year in revenue per employee is a common benchmark). Deskilling and automation are constant forces working to put downward pressure on wages, and upward pressure on the amount of productivity squeezed out of each employee (a holy grail of artificial intelligence has long been to eliminate the programmer). Tech workers don’t own the servers, and they don’t own the intermediate software inputs to production. What they own is the ability to work.

So tech workers are workers, but the specifics still matter. High pay and autonomy influence consciousness and add difficulty to organizing. Some tech workers, especially the highest paid, don’t like to think of themselves as fundamentally similar to any other worker, and fail to see their common interest. Many tech workers dream of finding independence by starting their own company. Very few ever do, but ubiquitous tales of plucky tech startups “disrupting” entire industries help convince some tech workers that they’re actually business owners in waiting rather than workers. Rising interest rates and the drought of cheap money for startups will likely push that dream even further out of reach and continue to clarify the difference between an owner and a well-paid worker.

Not all tech workers are the same, either. Many think of the full-time software engineer as the archetypal tech worker, but tech companies don’t run without armies of quality assurance testers, analysts, help desk and support staff, temps, contractors, data center and physical infrastructure employees, and, especially, precarious immigrant and outsourced labor. Salary, job security, and autonomy vary massively across these groups. Unionization has so far been won primarily in the hardest-pressed sections, with game developers and physical infrastructure workers being of particular note.

Despite the barriers to organizing tech workers, the task is an important one. The tech industry accounts for almost 10 percent of the United States’ GDP, most of that concentrated in the five largest tech companies. Not only that, but the knock-on effects of a strike or other action could be multiplied many times by how many other industries are dependent on tech for their day-to-day operations. For an extreme example, if Amazon, Microsoft, or Google employees were to disrupt their companies’ cloud operations, the global economy would grind to a halt: banks unable to communicate with each other, most consumer internet traffic dead, and nearly every website the average person uses either shut down or severely impacted. That’s an immensely powerful weapon to wield. Tech workers are workers and are in need of organizing. Socialists ignore that at our own peril.