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A hiring freeze in Big Tech, a tight supply of money from VCs to startups, and a bleak macroeconomic environment could push tech jobs and talent into a balance point where demand meets supply.
At the end of 2019, big tech companies were hungry for talent. Google said in its annual report that it increased its workforce by nearly 23% to 1,18,899. The search giant noted that it will hire more engineers and product managers to run its services. The company also wanted to expand its sales team to grow the cloud business. Other top technology companies also tried to increase the number of their employees. However, COVID-19 has changed the global economy, forcing several businesses to rethink their strategies and change course. Many companies had to lay off their employees. About 20 million workers lost their jobs in the US alone. Half of these cuts occurred in the last two weeks of March 2020, a period when several countries were enforcing lockdowns to protect their citizens from the spread of COVID-19.
Layoffs during a pandemic
The impact of the pandemic on jobs has been far-reaching. In the Asia-Pacific region, millions of people were asked to work part-time or not at all. According to a 2020 International Labor Organization (ILO) report, working hours in the region are estimated to have decreased by 15.2% in the second quarter and by 10.7% in the third quarter of 2020 compared to pre-crisis levels.
An ILO report titled “Asia-Pacific Employment and Social Prospects 2020: Navigating the Crisis towards a Human-Centred Future of Work” estimated that the pandemic destroyed around 81 million jobs in 2020 compared to pre-crisis trends. It found that another 22-25 million employed persons were pushed into extreme poverty, living on less than $1.90 per person per day. A large proportion of these jobs were gainful, low-wage jobs; The worst affected were service sectors such as leisure, travel and hospitality. For example, about 16.1 million of the nearly 20 million jobs lost by U.S. workers in March 2020 were in the hospitality sector.
Sizing the market
But jobs that allowed people to work from home had a longer run. According to ILO estimates, only 8% of workers worldwide were permanently working from home before the pandemic. Since then, this size has grown exponentially. The multilateral organization’s labor force survey showed that in the second quarter of 2020, around 17% of the world’s employed population worked from home. That’s about 560 million workers.
Separately, internet consumers who chat, share videos and shop online using e-commerce platforms and social media applications have increased usage time. Several billion consumers and half a billion workers have thus become an important market for large technology companies to sell their products and services. And to grease the wheels of digital commerce, they started looking for people who can code, sell and put digital things in the cloud.
Google has maintained its pre-pandemic hiring pace, bringing its total headcount to 1,74,014 as of June 30. The search giant is not alone. Microsoft, which shares its annual report midway through each year, nearly doubled its headcount to 2,21,000 between July 2018 and June 2022. While Facebook’s total headcount jumped 60% between the end of 2019 and 2021, the social network’s total headcount network was less than half that of Microsoft or Google. Amazon, a giant in the Big Tech pack, said it had about 1.6 million full-time and part-time employees as of December 31, 2021.
A burning problem
Hiring technical talent was not easy. In 2021, US tech job openings nearly doubled, while the average number of applicants shrank by 25%. According to recruitment analytics firm Datapeople, there were 6.5 times more IT job vacancies than talent to fill them.
According to Stack Overflow’s survey of more than 500 developers, 25% of developers were actively looking for a new job, while 54% said they were passively open to new opportunities. And when considering a new role, 65% cited salary as the biggest reason for jumping ship. In Adobe’s survey of 5,500 professionals, nearly 35% of respondents said they plan to change jobs in the next year. Generation Z respondents were 21 percentage points more likely to change jobs.
At the opposite end of the spectrum, start-ups flooded with venture capital (VC) cash have lured tech talent to join their ventures. Fortune 500 companies, including large tech firms, fell 25% in the tech world as startups, unicorns, newly public companies and non-tech companies increased their hiring for technology roles. It’s no wonder, then, that tech companies have tried different ways to attract talent. Some companies even posted job offers without explicit degree requirements from candidates. Last year, the number of such contributions increased by almost 25%. However, top tech firms still prefer a master’s or MBA degree more than ever, with 25% more jobs asking for them.
Hitting the brakes
Despite trying to build a bulging talent bench, top tech firms are now holding back on hiring.
Google CEO Sundar Pichai told employees in July that the company would slow the pace of its hiring efforts for the rest of the year. Microsoft said it would eliminate several of the listed vacancies. Apple also said it would slow its hiring for the rest of the year as it prepares for a potentially tough economic climate. The iPhone maker has 1,54,000 employees as of September. Amazon, the largest tech employer, already said in April that it would slow hiring because it is overburdened.
The hiring rethink comes at a time when venture capital firms are tightening their purse strings due to geopolitical, supply chain and economic uncertainty. They are now more selective in their bets, with a strong focus on fintech and cleantech, according to KPMG’s quarterly venture finance report.
“With declining valuations, many tech companies performing poorly on public markets, and an end to geopolitical uncertainty in sight, not to mention other challenges facing the venture capital market around the world, we are starting to see investors instruct their portfolio companies to conserve cash. .” said Jonathan Lavender, Global Head of KPMG Private Enterprise, KPMG International, commenting on the Risk Pulse report.
A hiring freeze in Big Tech, a tight supply of money from VCs to startups, and a bleak macroeconomic environment could push tech jobs and talent to a tipping point where demand meets supply. The ending September quarter may shed more light on this. But until then, the Big Tech companies that have gobbled up HR in the past two years can sit back and re-prioritize where to deploy their new hires.
The impact of the pandemic on jobs has been far-reaching. An ILO report titled “Asia-Pacific Employment and Social Prospects 2020: Navigating the Crisis towards a Human-Centred Future of Work” estimated that the pandemic destroyed around 81 million jobs in 2020 compared to pre-crisis trends.
Hiring technical talent is not easy. Start-ups flush with venture capital (VC) money are luring tech talent to join their ventures. Fortune 500 companies, including large tech firms, fell 25% in the tech world as startups, unicorns, newly public companies and non-tech companies increased their hiring for technology roles.
Despite efforts to build a talent bench, top tech firms are now holding back on hiring. The hiring rethink comes at a time when venture capital firms are tightening their purse strings due to geopolitical, supply chain and economic uncertainty.