Alphabet and Spotify join the tech layoffs trend

Alphabet and Spotify are the latest to lay off swathes of staff.
23 January 2023

In a climate of hiring freezes, where can laid off tech workers go?

The significant big tech layoffs have been going on for so long now that on one level, they barely register as news. “Who’s next?” has become the doctrine of tech news organizations – the layoffs have been in some sense inevitable since many tech firms overinvested in staff to deal with increased demand during the pandemic, and then the post-pandemic economic crunch arrived, with reduced investment, reduced customer expenditure to ride out a recessionary economy, and a shrinking tech sector.

But each of the major big tech layoffs hurts at least a small townsworth of people and makes their lives harder.

So to get two big tech layoffs in the space of 24 hours is a significant double-punch.

“Full responsibility.”

Alphabet, owner of Google, has announced it will lay off 12,000 workers, representing 6% of Alphabet’s workforce worldwide. CEO Sundar Pichai said he took “full responsibility” for the redundancies – though very notably, it’s unlikely that his job will be one that’s axed, so quite what “full responsibility” means in this context remains unclear.

There is at least a sense in the severance package that Alphabet feels bad about cutting loose 12,000 families around the world. It includes paying all 2022 bonuses, 16 weeks of salary, which will cover bills until mid-2023, paid vacations, and six months of health coverage. While the layoffs are still not ideal, especially for workers who have been with the company for some years, that’s a package that waves Alphabet’s “people credentials” in the air while a lot of people try and find alternative roles in a tech industry which is either shedding jobs like dandruff or at the least instigating hiring freezes for the rest of 2023.

The laid off would have no luck at Microsoft, for instance, which is axing 10,000 of its own staff, nor at Meta, which is cutting 13,000 staff out of its infrastructure. And they would be laughed out of Amazon, which is kicking 18,000 families to the kerb.

Spotify joins the trend.

Nor, it turns out, will there be any room at the inn at Spotify. The music streaming service followed Alphabet’s announcement mere hours later with its own declaration that it is to shear off 6% of its worldwide workforce.

Granted, that’s a far smaller number of actual families looking for a way to keep the lights on, as despite its stunning worldwide audience recognition level, it has a total staff of around 10,000 people. But the percentile job cuts are fairly consistent with the biggest players in the tech industry.

As with Alphabet, Spotify boss Daniel Ek said he took “full responsibility for the moves that got us here” when he announced the redundancies on the company blog, though again, what that responsibility amounts to is vague, as Mr Ek looks to be staying in place as the company loses around 600 staff. Chief content and advertising business officer, Dawn Ostroff, is to leave the company though, “as part of a broader reorganization.”

Spotify expects to pay around 35 million Euros (roughly $38.7 million) in severance for its actions – which means if we lived in a world of equal pay, each worker let go would be receiving around $63,500. Naturally, that’s not the world in which we actually live, so the payoffs will be graduated.

The company has never yet made a yearly net profit, but has managed to invest heavily ever since its launch – a factor largely responsible for its worldwide popularity.

Overambitious investment.

“In hindsight, I was too ambitious in investing ahead of our revenue growth,” Mr Ek admitted in response to the layoffs.

While every sector of industry understands the need to sometimes resort to layoffs as a way of ensuring a lean profile in tough economic times, the waves of boom-and-bust hirings and firings across the tech sector in the pandemic era and the subsequent recessionary economy begin to look like the makings of a personnel “run” on the industry – a time in which jobs in some of the biggest technology firms on the planet have become understood to be itinerant, rather than permanent. Meanwhile, billionaire shareholders at Alphabet say its jettisoning of 6% of its worldwide staff is by no means sufficient, demanding the layoffs should extend to at least a full 20% of staff – me than thee times the 12,000 layoffs just announced.

Whether this habit of axing staff in difficult times will affect the long-term hiring ability of the industry the next time it finds itself in sudden need of an influx of staff remains to be seen. But for now, the direction of travel for staff across the tech industry is firmly fixed for what looks like the remainder of 2023, and potentially significantly longer, depending on how long a combination of standard recessionary factors and, for instance, special circumstances like Russia’s chokehold on gas pipelines, remain in place.

That direction is downward and out, as many large tech-based firms have placed an absolute hiring freeze in place. The question of where experienced tech staff are supposed to work while maintaining their skills base until the next time the tech industry decides it needs them remains as yet unanswered.