Amid rapid inflation and job loss in financial and retail sectors throughout the United States, technology companies like Apple, Google, Instagram, and Twitter have enacted a series of layoffs to save themselves from bankruptcy, surprising hundreds of now-former employees.
According to a report last week from the Verge, many investors for Big Tech companies like Apple, Google, Facebook, and Twitter are evaluating their investments, given the current slowdown of the U.S. economy.
According to experts, many of these firms have billions of dollars in reserves but have not used them yet to support operations.
One of the tools used for measuring tech companies’ investment value is the revenue per employee, and with the majority of staff hired during the COVID-19 pandemic, current employee revenue has decreased.
According to statements from Meta, Google, Microsoft, Salesforce, Amazon, and others, one of the reasons they have let many of their employees go is because of current economic circumstances, uncertainty in the future, and changes in revenue.
Despite thinking that layoffs will save tech companies money, experts point out the billions of dollars and severance, with the idea that fewer salaries result in lower company costs.
While the layoffs do not cut costs for tech companies, experts point out that there is little evidence that they improve profitability and can even do the opposite and hurt it.
“Oftentimes companies do not have a cost problem,” said Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business, to the Verge. “They have a revenue problem. And cutting employees will not increase your revenue. It will probably decrease it.”
According to past studies, companies that closed their businesses and enacted layoffs had greater returns than those that only did layoffs. During the 2020 COVID-19 pandemic, tech companies that enacted layoffs did not affect their company’s stock prices.
Following Elon Musk’s takeover of Twitter, many employees were let go by the Tesla CEO for several reasons, including large staff and extreme left-wing politics that tainted the company’s image.
Since then, many Twitter employees and hundreds of other tech employees have taken to Twitter, Facebook, Instagram, and TikTok to post their conversations about being let go.
Related Story: 2022: Worst Year for S&P 500 Since 2008, $8.2 Trillion in Losses