How can Big Tech, the most powerful industry in the worldwhile celebrating one of the best two-year periods ever, let them fire 200 thousand people? Bags are bad, right. But looking at the financial statements, revenues continue to be record high. A half closed the 2021 to 117.9 billion compared to 85.9 of the 2020. For the 2022 expectations are of 118.1 billion. alphabet (Google) earned 257 billion in the 2021: +40% on 2020. The latest data available for 2022 that of the third quarter ended a 69 billion (+6% on the same period of the previous year). Amazon earned in 2021 469 billion, a turnover that has almost doubled compared to pre-pandemic. In the third quarter of 2022 (latest figure) revenues increased by 15%. Result? Massive layoffs. Sure that the social pact between companies where the entrepreneur takes the risk and big gains, but it preserves the employment history of another century. Let’s see the numbers to understand them well.
Who is cutting
Meta, the company that manages the Facebook platformkin late November announced 11,000 fewer seats, 13% of the total workforce. Google is sending 12,000 people home around the world (this was announced with a simple email from the CEO of the Alphabet company, Sundar Pichai, where we read that the last two years have seen a period of dramatic growth. Not a typo: when you say the strength of psychology). Elon Muskjust entered in Twitter(7,500 employees), announced plans to halve the workforce and has started sending emails to let the closest circle of collaborators of the old top management know that they can look for another job. Not to mention that many have preferred to leave on their own given the new corporate climate. A few hundred meters from the Twitter headquarters at San Francisco hard not to notice from Market Street the tallest skyscraper on the west coast of the United States, the modern pyramid of Salesforcesymbol of the power of CRM (customer relationship management system). The cuts in this case are 8 thousand10% of the total. Microsoft announced that by March 31, 10 thousand employees around the world will no longer be on their payrolls. Moreover, in the same days, as if it were natural, the same company announced an investment of ten billion dollars in ChatGPTthe artificial intelligence chat specialized in understanding human natural language. Spotify is laying off 6% of its workforce while music is more listened to than ever. Coinbase, the cryptocurrency platform, leaves 950 people without a desk, 20%. Same message from Amazon, different magnitude: 18,000 people at home, not counting seasonal workers. The long list: IBM, 3,500, Sap, 3,000. Basically, among the big giants, only Apple has not announced cuts. What is happening?
Comparison of financial crises
The two scenarios could not be more different: the crisis of 2008 was systemic, comparable according to the same Ben Bernankethen head of the Federal Reserve, at the crash of 1929. Toxic securities built on variable rate mortgages sold to families with low income capacity spread like a virus, contaminating Europe as well. Lehman Brothers’ 25,000 became millions in every sector, with a cascading effect. But if we stay with the finance industry, according to Bloomberg data, in the 13 months following the collapse of Lehman, the banking sector lost 216 thousand jobs. Only the massive public bailout, at taxpayer expense, averted a larger crisis. Other comparison: in the month following theSept. 11the largest act of war on US territory, were cut 250 thousand jobs, but all over the world and merging different sectors (including civil aeronautics). None of this can be seen in the technology industry: there is no structural crisis. In fact, profits are growing. So why the layoffs?
The sector and the mistakes of the banks
In the United States, the technology sector is second in terms of overall impact, only to the health industry which, being substantially private, has an abnormal value. D work at approx 12.2 million Americans out of a total of nearly 160 million employed; just under 10%, therefore, but with a great impact.
According to Bureau of Labor Statisticsthe US Bureau of Labor Statistics, the tech sector’s average annual allowance of 97 thousand dollarsalmost double the average for other sectors. To have a term of comparison McDonald’s alone has 200 thousand employees but most of them work at the checkout for $28,000 annually. For comparison, McDonald’s alone has 200,000 employees, but most of them work the cash desk for $28,000 a year. In the so-called Big Tech how Facebook and Google120/130 thousand dollars the entry salary for engineers.
Moral: the licensees of this industry have a much higher specific weight than those of other sectors in terms of GDP and lost consumption
In the USA the highest salary does not correspond to personal savings higher because the propensity to consume even exceeds the monthly income thanks to the diffusion of credit cards. In 2021, tech occupied a market equal to $1.6 trillion. In 2022 we switched to 1.8 trillion; However, the Stock Exchange value is enormously higher if we consider that Apple alone has a capitalization of 2,300 billion after losing approx 1,000 during 2022. Investors are fleeing the stock exchanges due to the hypertrophic valuations of Big Tech by investment banks; although the paradox that these companies, just in recent years, have made the best deals thanks to the acceleration in the use of technology services following the pandemic. The net profit of alphabet in 2021 state of 76 billion (40 in 2020). For A half the same state value of 39.3 billion (29 in 2020). Amazon always had a net profit of 33 billion (21 in 2020). Microsoft brought home a net profit in the same year of 61.2 billion (44 in 2020). Non-candy numbers.
The multiplicative effects
The bill for bank errors is now paid not only by the 200,000 employees of the last 13 months, since it is a characteristic of the technological industry that feeds an induced greater than itself, a bit like the automotive sector made up of manufacturers of a thousand pieces. Thousands of freelance software developers are taking the long wave. But it doesn’t end there. Exactly ten years ago the UC Berkeley professor, Enrique Morettipublished The new geography of work, a book much cited also by the former US president, Barack Obama. Thesis: each new job in the digital field brings with it another 5 traditional jobs in the medium-low range for very practical reasons. Where a district of tech companies develops, basic services such as restaurants, bars, transport are born. If the thesis is also valid on the contrary, it means that an employment tsunami is coming. Without forgetting the many who live thanks to the Gig economy, not tracked by statistics. It must be said that the turbo-liberal American economy is accustomed to layoffs without too much attention, only to regret it later. At Boeing and throughout the civil aviation sector they are eating their hands over the cuts made during the pandemic: these are workers not only with high skills, but very expensive to train due to the vitality of the procedures to be respected. Today they are needed, but they are hard to find.
I’ll fire you with an email
the case of highlighting a difference between the companies of Silicon Valley and all the others: they have always told of wanting to improve the world, of having great attention for their employees (fitness room and physiotherapist to massage necks caused by prolonged immobility in front of a computer). Today, those same managers and founders show their true face, cynical and ruthless: As they continue to make billions, employees are firing them via email. Without even giving time to say goodbye to office colleagues.
February 2, 2023 | 06:59
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Big Tech: record profits, but mass layoffs. One million jobs at risk | Milena Gabanelli
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