Daily Management Review

Tech Job Losses Persist Following The "Year Of Efficiency"


Tech Job Losses Persist Following The "Year Of Efficiency"
Although the "Year of Efficiency" for Big Tech may have ended, recent layoffs at Google and Amazon suggest the companies will continue to reduce staff in 2024 as they make significant investments in generative AI.
This year, according to analysts and industry experts, layoffs will likely be more targeted and smaller. Companies that are trying to catch up in the AI race are more likely to take this action in order to balance the billions of dollars they are investing on the technology.
The Google parent company, Alphabet, opened a new tab last week and announced that it will be investing in its "biggest priorities" in light of the approximately one thousand employees it had cut off across a number of departments, including the voice assistant unit and the Fitbit and Pixel teams.
According to a report on Tuesday, hundreds of positions were being slashed at the company, meaning that even its advertising sector was not spared.
A number of hundred people were let go by Amazon.com last week from its streaming and studio activities, according to a new tab. According to media sources, hundreds of positions were also eliminated from its Audible audiobook division and Twitch live-streaming site.
As of now in January, tech companies have let off almost 7,500 workers overall, according to the tracking website Layoffs.fyi.
"No company wants to get left behind by the AI revolution and they are all making sure they have these capabilities and are prioritizing them, even when it is at the expense of other initiatives," D.A. Davidson & Co analyst Gil Luria said.
Google and Amazon are making significant investments in artificial intelligence. In an attempt to catch up to Microsoft in the AI race, Google released their eagerly anticipated Gemini model last month. Meanwhile, Amazon is working on a model called "Olympus" to take on OpenAI's GPT-4 model, which is used to create ChatGPT.
However, given that tech investment is likely to increase as a result of a more stable economy, the overall amount of layoffs is anticipated to be significantly lower than the significant reductions made last year.
In 2023, the tech industry lost 168,032 jobs, making it the industry with the most layoffs overall, per a report released earlier this month by Challenger, Grey, and Christmas.
Those were led by tens of thousands of cuts at major titans such Alphabet, Microsoft, Amazon and Meta, opens new tab, whose CEO Mark Zuckerberg named 2023 as the "Year of Efficiency".
"I don't think there will be a similar reckoning. (Last year) tech firms were shedding all these employees they hired during the pandemic," said GlobalData analyst Beatriz Valle.
"AI is driving a lot of dynamism but this only means that tech companies will be changing their hiring priorities."
According to a report that opens a new tab, several tech companies have been paying top dollar for AI positions. For example, Match's Hinge dating app was looking for a vice president of AI last year, with a base salary of up to $398,000, and Amazon was paying a top dollar of $340,300 for a senior manager of applied science and genAI.
Analysts and experts predict that the spending will raise investor expectations for the returns from genAI, but the payback for the majority of enterprises may take longer to materialise.
The only companies to profit greatly from the surge thus far are Microsoft opens new tab and chip giant Nvidia opens new tab.
Daniel Keum, an assistant professor of management at Columbia Business School, stated that historical data indicates that it may take up to ten years for new technologies to be profitable.
"The question is 'is it different this time for AI?' I am pessimistic, but many smart people believe it will be much shorter this time," he said.