Tech has shed nearly 200k jobs since January 2022. We need strategies to grow U.S. digital jobs again.
Recent layoffs weren’t caused by regulation — but they show we can’t take U.S. tech job growth as a given.
Last week Google announced plans to layoff 12,000 workers. This news comes on the heels of other tech company layoff announcements in recent months, including companies like Amazon, Microsoft, Meta, Twitter, and Salesforce
According to layoffs.fyi, layoffs in the tech industry from January 2022 until present totaled almost 200,000 employees. Crunchbase also tracks layoffs and estimates 46,000 workers in the tech sector have lost their jobs during January 2023 alone.
The most recent data from the Bureau of Labor Statistics’ (BLS) Job Openings and Labor Turnover Survey (JOLTS) show that between October 2022 and November 2022 California and Washington both saw significant increases in job separations. Microsoft and Amazon are headquartered in Washington while Meta, Twitter, and Salesforce are headquartered in California.
Factors Contributing to Tech Layoffs
What are some of the contributing factors for these cuts?
For one, the U.S. economy has experienced inflation and interest rate increases in recent months. As a result of interest rates, inflation, and changes in consumer behavior throughout the pandemic, companies are adjusting to current market conditions and cutting costs, including labor costs. These layoffs contrast with the hiring by tech companies at the beginning of the pandemic when many increased the size of their workforce responding to an increase in demand for products and services in the digital economy.
The Atlantic published an article summarizing the factors contributing to layoffs in the tech sector:
While these layoffs were not caused by regulation, perhaps now is the time to consider how policy can help facilitate additional growth in the U.S. digital economy.
Economic Implications of Tech Layoffs
So, what are the implications of these layoffs for state and local economies?
In the short-run, laid off workers are displaced and searching for jobs. As a result, consumer spending from laid off individuals is likely to decrease in the short-run and local communities may suffer as a result. This is due to how high-tech jobs create economic activities in other areas of the economy.
For example, a 2022 report by the Bay Area Council Economic Institute estimated the spending multiplier from high-tech jobs to be roughly 4.4, meaning that for every tech job created another 4 jobs are added to the economy — due to spending power and economic activity related to the tech industry.
Thus the consequences of these layoffs are felt not only by those who lost their jobs, but will also impact local communities for the period of time it takes displaced workers to find new jobs.
Additionally, unemployment insurance costs increase for states when unemployment rises, which is a direct consequence of layoffs. As layoffs mount and unemployment rises, tax revenue may be affected due to decreases in income and spending. As a result, states may have to find alternative sources of revenue. This can put financial strain on government bodies as well as individuals, as taxes and fees may rise as governments work to find alternative revenue sources.
Furthermore, these layoffs come at a time where governments are already delaying spending or cutting programs to address budget shortfalls. Delays in government spending could affect many areas of the economy including, small business growth, infrastructure development, and climate change initiatives. For example, Politico reports that in response to a budget deficit, California Gov. Newsom proposed cuts to electric vehicle funding and spending related to climate change.
Regulatory Future of the Tech Industry
Amidst these layoffs, President Biden recently published an op-ed in the Wall Street Journal. In the op-ed, he begins by highlighting the importance of the tech industry in America’s economy and global competitiveness:
Biden also called for regulatory changes in the technology sector. In general this is something voters support — but the details matter.
Polling of midterm voters conducted in November 2022 by Morning Consult on behalf of Chamber of Progress found that voters are specifically concerned with consumer protection from scams or malware, combating misinformation, and keeping prices low.
The tech industry needs smart regulation to form rules of the road and consumers need protection. However, it’s also important to consider the role the U.S. tech sector has played in our economy and to not take U.S. tech job growth for granted.
Economic Impact of Tech Sector
The tech industry is responsible for adding many jobs to the U.S. economy, both directly and indirectly. For example, CompTIA’s 2022 State of the Tech Workforce Report estimates that 8.9 million jobs in 2022 were related to tech.
The Interactive Advertising Bureau (IAB) also provides estimates of tech employment, including the use of multipliers, which measure how employment in one industry translates into employment changes through other sectors of the economy. Using academic research supported by Bureau of Labor Statistics (BLS) data, IAB estimates that the tech industry generated a total of 17 million U.S. jobs (direct and indirect) as of 2021.
Furthermore, IAB’s findings suggest that many jobs are generated by small establishments and self-employed individuals.
In addition to job creation, tech companies have increased access to services to underserved and underprivileged communities, supported entrepreneurship, and provided consumers more access to diverse products. These companies have made a tremendous impact on global economic growth and prosperity, shaping the way we communicate, do business, and live our lives.
Autonomous vehicle companies like Waymo make it easy for people to travel safely and conveniently. BlocPower is helping lower-income housing become more energy efficient. Microsoft has created tools that help us cope with the stresses of remote work, Miro allows every meeting to be a collaborative opportunity through virtual whiteboards, and Canva provides design software so all employees can effectively communicate visually.
Overwhelmingly, tech companies are creating impactful solutions that improve our lives as well as helping to create a future that is ripe with growth and prosperity.
We need a digital growth strategy
In order to continue supporting the tech industry and the economic activity it spurs, the government — at both federal and state levels — could play a more active role in supporting tech industry job growth.
The passage of the CHIPS and Science Act (Creating Helpful Incentives to Produce Semiconductors) is a recent example of how the Biden Administration has actively supported U.S. growth and global competitiveness in the technology sector.
This bipartisan legislation aims to keep American semiconductor chip production competitive globally and reduce U.S. reliance on other countries. The CHIPS Act illustrates how government policy can help support American industry and competitiveness. Given the willingness to further invest in the American technology industry via the CHIPS Act, policymakers should consider how to use similar investments to further bolster the tech industry, especially in the face of recent layoffs.
The growth of the U.S. tech sector has been taken as a given for a long time. With the recent layoffs showing many Americans losing their high tech jobs, it’s time for state and federal policymakers to tell us their plans for how they plan to grow our digital economy and support America’s tech workforce.
Chamber of Progress (progresschamber.org) is a center-left tech industry policy coalition promoting technology’s progressive future. We work to ensure that all Americans benefit from technological leaps, and that the tech industry operates responsibly and fairly.
Our work is supported by our corporate partners, but our partners do not sit on our board of directors and do not have a vote on or veto over our positions. We do not speak for individual partner companies and remain true to our stated principles even when our partners disagree.
