Layoff Contagion Spreads From The Tech Sector To Everywhere Else

Layoffs first started in the tech sector in 2022, resulting in more than 140,000 people losing their jobs. Consequently, there seems to be a contagion effect taking place, as more companies are laying off workers across a wide array of industries.

The Elon Musk Effect

Elon Musk’s first order of business after his $44 billion acquisition of Twitter was indiscriminately firing an estimated 50% of the social media platform’s workforce. To make matters worse, Musk reportedly gave the existing employees an ultimatum: commit to the new “hardcore” Twitter 2.0 or leave with a severance package. The expectation is for his staff to put in long hours and work with intensity, as Musk desires only those who exhibit exceptional production. According to internal estimates, 1,200 full-time employees left ahead of Musk’s commitment deadline, reported the New York Times. In the blink of an eye, Twitter’s workforce dwindled from 7,500 to about 3,700 after the separations from payroll.

It's likely that other tech companies will closely follow Musk’s strategy in trimming the fat. Tech giants that are seeing their stock prices fall and are worried about the harsh economic climate ahead know they need to lay workers, but may have held off because of the negative backlash associated with large layoffs. If Musk’s methodology works—enacting job cuts or making employees' lives so difficult that they’ll leave of their own accord—other businesses will be emboldened to downsize too aggressively.

The Contagion Effect

There is a herd mentality amongst corporate leadership. For example, lately, one company after another is announcing its adoption of artificial intelligence. Not too long ago, the metaverse was the talk of the town as companies were leaping into Web3.

The same goes for downsizing and hiring freezes. If a business leader at the helm of a bellwether company is conducting layoffs, others will follow. There will be concern by boards of directors that if everyone else is downsizing, why isn’t their company? Major shareholders will contend that management is not judicious in making tough decisions. By reducing headcount, shareholders and the board will benefit, in the long term, by saving money to help navigate a predicted upcoming recession.

Once a few firms within a sector lay off workers, it offers cover for other companies to follow suit. It makes it easier for the CEO and C-suite to conduct layoffs if everyone else is doing it too. They can prune the low performers without worrying about being accused of discrimination or biases.

Layoffs Range From Media Companies To Wall Street

According to LinkedIn and other sources, here are some of the most recent prominent downsizings taking place:

• Wells Fargo laid off hundreds of people in its mortgage division due to challenges in the real estate market. The Federal Reserve Bank’s program to hike interest rates pushed out potential home buyers.
• CNN is “laying off hundreds of employees in a cost-cutting effort that illuminates the financial challenges facing a wide array of media companies as the economy teeters toward a possible recession.” Warner Bros. Discovery, its parent company, looks to slash $3 billion worth of costs over the next two years across its several brands.
• Gannett initiated an additional round of layoffs only four months subsequent to the previous terminations of hundreds of employees. The layoffs are part of Gannett’s plans to cut its news division team of 3,440 by 6%, which is around 200 people who will be adversely impacted.
• The Washington Post will discontinue its print magazine that has been published for more than six decades, the newspaper’s executive editor, Sally Buzbee, announced. About 10 staff members were informed that they would no longer be employed, according to Shani George, WaPo’s vice president for communications.
• Morning Brew, a fast-growing media enterprise aimed toward a younger demographic, is laying off 14% of its staff. According to its headcount from LinkedIn, around 50 people will be affected.
• Tech-news website, Protocol, closed its virtual doors and parted ways with around 60 employees.
• BuzzFeed, one of the pioneers of the new form of light online journalism, is letting go of about 180 people, representing 12% of its workforce. Similar to the story of most of the impacted companies, BuzzFeed seeks to cut costs in a challenging economic environment, and a decline in advertising spending by businesses.
• Crypto exchange Kraken was not immune to the crypto fallout from FTX and plunging token prices. The digital asset platform is letting go of about 1,100 workers.
• AMC Networks, home of the Walking Dead and Breaking Bad, plans to lay off 20% of its staff. Decelerating profits caused sales to fall, as customers continue to prioritize streaming over cable.
• PepsiCo, the name behind Frito-Lay Snacks and Gatorade, is planning to cut hundreds of jobs at its North American headquarters.
• Vaping company Juul laid off a third of its workforce, about 400 people, after securing financing to avoid bankruptcy.
• Investment bank Barclay’s laid off about 200 employees in its banking and trading units. Citigroup laid off about 50 traders. Morgan Stanley is letting go of about 2% of its staff, impacting about 1,600 of the company’s 81,567 employees.