To Lessen Tech Firm Layoffs, Government Monitoring Is Key

Editorial

Millions of jobs are created by technology, but this growth spur is soon followed by layoffs at a higher than in the non-tech industries. Top-down solutions are needed to protect workers.

The widespread layoffs by tech companies and start-ups happening during the closing of 2022 should be an alarming event for policymakers. We are seeing the tendency of tech firms to engage in overhiring sprees only to dispose of the workers when the expansion goal is achieved. For instance, Amazon is planning to lay off about 20 thousand of its employees. Meta terminated the employment of more than 11,000 employees in early November and imposed a hiring freeze until the first quarter of 2023. If tech companies close their doors to new workers, it becomes difficult to find a job substitute, which can result in a long period of unemployment.

Governments need to correct this issue from both sides of labor and companies. In order to support and protect labor, unemployment insurance is required to protect workers in the short term, allowing them to cope with unemployment while looking for a new job. Unemployment insurance is generally higher in advanced economies than in emerging economies. However, we still have countries like the United States, the United Kingdom, and the Republic of Korea whose spending on unemployment protection is lower than most countries than provide such benefits. This is especially difficult in times when the number of quality jobs available is not equal to the number of people looking for jobs. Good unemployment insurance should also consider the worker's condition at the time of layoff. The evidence of Meta's recently laid-off employees who were on maternity leave within days of her due date clearly demonstrates the failure of the employment termination decision to consider the nature of what needs to be insured. Besides, this shows a gender-blind nature of layoff decisions. Decent unemployment insurance should incorporate these gendered consequences of involuntary unemployment for women on maternity leave or about to enter one when they were fired.

From the side of firms, governments should monitor tech companies still in their 'okay' status and look for early warning signs. Governments need to protect workers being laid off and those that might be laid off if the unexpected occurs. Rather than just seeing start-ups' growth and labor force absorption as positive occurrences, there needs to be scrutiny of the business scale, the quality of jobs provided, and the terms of the job contract.

Secondly, there needs to be a regulation regarding how long in advance companies should inform the workers regarding the intention of restructuring. It has become increasingly common for tech employees to only receive information about their termination of employment once they get an email or when they cannot log in to work. This exposes workers to a moment of stress and mental breakdown that is detrimental to their overall well-being.

Thirdly, tech companies should be more precise about the longevity of the position they seek to fill. Many employees were given full-time jobs only to be dismissed later without warning. Tech firms also seem unable to differentiate between a short-term, temporary increase in demand and continuous growth. A recent example is the engagement of tech firms in full expansion mode during the COVID-19 pandemic because of the significant shift of economic activities to online platforms. But when the pandemic restrictions were lifted, demand dropped, and companies were pushed to rethink their business needs. The data captured by Layoffs.fyi shows that nearly 1,000 tech companies laid off their employees in 2022.

Governments must regularly monitor tech companies' hiring practices and contracts and sanction those that engage in overhiring practices. A training toolkit on establishing fair recruitment processes by ILO describes the importance of Government institutions in recruitment monitoring. Still, it mainly concerns human rights abuses such as high recruitment fees, emotional and physical violence, or omission of information. It is necessary to take this monitoring one step further by ensuring firms do not over-promise the term of employment.

Employees can always be adaptable, improve their skills, revise their resumes, and even build a strong network. But the underlying problem here is the way tech companies treat employees. If a top-down solution is not implemented, then we will always see massive layoffs as a recurring problem every once in a while.

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This article is featured in JUSTIN Development Review (JDR) December 2022 Issue