Is the global economic crisis hitting Big Tech?

With experts predicting a possible recession, layoffs at some big tech companies are coinciding with a historic talent shortage. What’s going on? We’ve cut through the confusion to find out.

 The tech talent drought

The Great Resignation continues to break records, with tech workers quitting in droves globally, forcing employers to compete for scarce talent by offering increased wages and benefits. This makes job-hopping potentially more lucrative than staying put, fueling further employment churns, with surveys in the US highlighting up to 72% of tech/IT professionals thinking of quitting in the next 12 months, which is significantly higher than 55% of the overall US workforce. However, it’s not only the ‘Great Resignation’ that has been driving the hiring crisis. Many employers reduced training and development during COVID and subsequently found many roles unfilled after the global economies opened up.

Meanwhile, some high-tech employees are dropping out of the workforce over post pandemic burnout, and they can afford to be pickier, with the average candidate fielding more than two offers, according to recruitment trends. Subsequently, with the increase in hybrid or remote working, companies that insist on having staff in the office full-time are potentially losing candidates to those other opportunities.

For software developers/software engineers in particular, skill testing tends to be overly academic and irrelevant to some jobs, meaning employers are screening out perfectly good candidates, despite demand making finding experienced individuals rare.

Soaring salaries for in-demand roles

The talent shortage and inflation drove the average US tech salary up 6.9% from 2020-2021, hitting a record high of $104,566. Leading salary increases were web developers (21.3%), database administrators (12.4%), and technical support engineers (12.4%). Recent graduates are now scoring six-figure starting salaries for entry-level roles, even out-earning veteran workers in some companies.

A Software Engineer in the UK is now typically earning around £63,400. Overall, salaries range from £32,500 to £104,000, with approximately a 13% increase over the last 15 months. “On average, a person's salary doubles their starting salary by the time they cross the 10 years' experience mark.”

Will a potential recession affect this bubble in the US and globally? Theoretically, more layoffs/redundancies would mean more talent available, reducing employees’ bargaining power and reducing salary increases and expectations.

Layoffs and economic turbulence

Inflation, falling stock markets and rising interest rates worldwide led to some big tech layoffs in 2022 at the highest rate since 2020. The month of May saw the most startup layoffs since the beginning of the pandemic, with 71 tech startups letting go of about 17,000 employees worldwide. On the other hand, tech giants including Meta, Microsoft, Twitter, Snap, Uber, and Wayfair have announced hiring freezes or slowdowns.

However, most layoffs at big tech companies have been for non-technical roles. And some employers admit to cutting jobs because they over-hired during the pandemic in a fit of excitement at being able to recruit remotely.

High-tech jobs are still growing

Despite these anxieties, tech is still prosperous and growing, with more people employed globally in the sector than a year ago. There is a slowdown, but it’s relative!

LinkedIn looked at Emerging Jobs worldwide highlighting the continued increase ranked by a combination of growth and size of the demand. This job sector growth, includes some of the most in demand engineering/tech jobs in 2022, such as:

• Backend Developer
• Business Development Representative
• Computer Systems Administrator
• Machine Learning Engineer
• Solutions Engineer
• Technical Product Manager
• UX researcher
• Software Engineer
• DevOps Engineer
• Computer Vision Engineer
• Cybersecurity Analyst

Innovations like the metaverse, the Internet of Things (IoT), self-driving cars, and Web 3.0 (a new blockchain-based iteration of the internet) look set to push demand for tech professionals higher still. Many tech companies are expanding their offerings and taking on new staff to deliver them, notably, Amazon, which is creating more than 2,500 new jobs, and Microsoft, which is expanding its campus in Redmond, WA to accommodate up to 8,000 new employees.

Specialised Engineering in the UK has been one of those ‘pandemic-proof’ job categories, showing a continued rise over the past few years. Specialised engineering jobs grew by 45%, including a sharp rise in Game Design roles (58%) as the UK games sector hit record size during the pandemic. It’s worth noting that this category had one of the lowest female ratios of hires at 16% (just after construction with 15% female hires).

Most layoffs aren’t about waning demand

On closer examination, it seems like most of the companies’ making redundancies or slowing down hiring are having industry-specific issues that aren’t related to the global uncertainty.

Netflix blamed its 300 layoffs on password-sharing, competition from rivals like Prime Video and Disney+, and its decision to stop its service in Russia. Similarly, Meta blamed its hiring slowdown on competition from TikTok and privacy changes by Apple hitting its ad revenue. Other companies paused hiring out of an abundance of caution while they wait to see how the economic situation develops.

While no job is 100% future-proof, it seems like tech professionals are exceptionally well placed to ride out any storm. If you’re looking for work or thinking of changing jobs, the best things you can do are to keep up with the breakneck pace of innovation, keep your GitHub profile and portfolio up to date, keep working on projects–and talk to us to discover how you can use this unprecedented situation as a springboard for your career. For more information regarding how we can help, please contact us on 01582 450054 or info@redlinegroup.com