PayPal announced their plan to lay off 2,000 employees in the coming weeks. This would amount to cutting out 7% of their workforce. President and CEO, Dan Schulman, said the change is to address the changing macroeconomic environment and focus resources on core priorities. PayPal's stock dropped 2% after these announcements. This announcement came after Workday, Google, Microsoft, Salesforce, and many other tech giants would all be laying off workers.
This trend of tech giants laying off workers is due to the fear of a recession upcoming. It is also being blamed on Covid-19 over-hiring. During the pandemic these tech companies boomed and experienced big growth thanks to their constant innovation and capitalization on current trends. This boom in growth allowed an increase in hiring and employees. Now as a recession is on the horizon and the companies are dealing with lowered stocks, less growth, and high inflation they are downsizing.
Many tech companies have stated that over-hiring in the previous years is the reason for their layoffs, but their maybe some other reasons behind the scenes. One maybe that the tech industry has always been a growth based industry. When the industry is down it is never down for long. These companies are not just gonna take an upcoming recession and there are a few ways they can continue their growth. One way is to sell more products or raise prices. Another way is to cut employees and lower expenses. The latter is the approach many companies have taken for the time being. Another reason for the layoffs could be because the companies see a need to innovate and must divert resources toward research and development. Some have also suggested that tech companies may just be copying each other and following the trend.
Articles: https://www.cnbc.com/2023/01/31/paypal-to-lay-off-2000-employees-in-coming-weeks-about-7percent-of-workforce.html
https://www.forbes.com/sites/qai/2023/01/27/why-are-tech-companies-laying-off-all-these-workers/?sh=589666064fc6
It is amazing to me how these big tech companies can lay off so many people. Do these technology companies know that much more than we do about a possible recession? It would be sad for these companies to be following a trend as they are messing with individual's lives.
ReplyDeleteIt makes sense that many companies are downsizing due to the expectation of a recession but the scale at which they are doing it seems somewhat extreme. It would be a very interesting if many of these companies were following the trend set by their competitors to cut large amounts of their workforce.
ReplyDeleteI would be curious to know how many employees they hired during the pandemic. As you pointed out, some companies have over-hired in recent years. It would be interesting to see if Paypal is taking these measures to correct over-hiring issues or if it is because they are struggling and need a way to cut costs.
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