How Will Recent Tech Layoffs Affect The IT Labor Market?
By Monika Mueller
Softensity’s EVP Consulting Services and Head of LATAM Monika Mueller is a Forbes Technology Council member, and this article originally appeared on Forbes.com.
For the past several years, organizations across industries have been feeling the tech labor crunch. Demand for skilled labor was on a steady upward trajectory when the pandemic-driven tech boom turbocharged the trend and the talent gap grew even more pronounced.
Amid the fierce competition for tech workers, salaries skyrocketed and IT professionals got more selective—while growing accustomed to ample perks and the flexibility of remote work. Cut to 2022, and a reported 140,000 jobs were slashed from public and private tech companies.
The trend appears to be continuing into 2023. Barely into the year, more than 94,000 tech jobs have already been eliminated, according to Crunchbase. No corner of the industry appears to be untouched, as big players like Microsoft (down 10,000 jobs), Alphabet (12,000 jobs) and Amazon (18,000 jobs) scale back in dramatic fashion.
So where does that leave the tech labor market in 2023? Will it be flooded with once-elusive tech talent? And will sky-high tech salaries self-correct? Several factors play into the state of the tech labor market today. Let’s take a closer look and explore what it means for businesses looking to hire tech talent in 2023.
Are tech layoffs a reactive correction or a proactive precaution?
Plenty of tech companies have admitted that recent layoffs are the direct result of over-hiring during the pandemic tech boom. But an industry correction from overzealous projections isn’t the only factor that explains recent tech layoffs, which are the most significant since the dot-com bubble burst in 2000.
Many companies that did not over-hire during the past couple of years are now tightening their belts in preparation for a potential recession, citing high inflation, rising interest rates and economic uncertainty.
Is the tech labor pool growing?
On paper, it appears that there should be an embarrassment of riches when it comes to tech talent that has reentered the labor pool—but what’s the reality? According to a new report from Janco Associates, the tech job market will continue to grow in 2023, albeit at a slightly slower pace than in 2022.
They predict that the IT job market will add 174,000 jobs in 2023, a slight dip from the 186,300 jobs added in 2022. Meanwhile, the tech unemployment rate dropped to 1.8% in December, compared to the overall national unemployment rate of 3.5%.
According to Revelio Labs, over 70% of laid-off software engineers are finding new jobs within three months. This shouldn’t be surprising, as there remain ample open IT job listings that go well beyond tech companies. In fact, tech jobs dominate Indeed’s Best Jobs of 2023 list, which includes: full-stack developer ($129,637 mean annual salary), data engineer ($135,260 mean annual salary) and cloud engineer ($133,114 mean annual salary).
Where are displaced tech workers going?
Needless to say, competition for tech talent remains incredibly high. Consider Indeed’s recently published list of companies with the most tech job listings featuring a top five that includes the likes of Deloitte, PwC, Accenture and Canonical.
One emerging trend that can be attributed to recent layoffs is that tech workers are increasingly looking for jobs in industries beyond tech that may provide more stability in an uncertain economy.
These days, nearly every industry has a need for skilled tech workers, and many of these sought-after professionals are expanding their scope of interest to different sectors. In 2023, savvy companies of all sizes have a rare opportunity to attract the attention of displaced talent that may be disillusioned by big tech.
How can companies attract tech talent?
Paychecks remain important, of course, but there are a number of ways organizations can compete for tech talent. In addition to a newfound desire for stability in an uncertain economy, tech workers will continue to prioritize flexibility, remote work opportunities and a culture that promotes growth opportunities, rewards and recognition.
You’ll need a multipronged approach to truly attract and retain tech talent in today’s competitive market. Not sure where to start? Consider offering ongoing support in the following areas: community building, educational opportunities, skills development, knowledge sharing, recognition and appreciation, career advancement and, finally, fun and entertainment—yes, this is important, whether your team is in-office or remote.
What is the outlook for IT labor in 2023?
Unfortunately, recent big tech layoffs don’t signal the end of the IT labor shortage. Tech salaries remain high, and job listings are plentiful enough to allow skilled professionals to be choosy about where they work.
However, there may be a silver lining for companies of all sizes, across all industries, as recent tech layoffs inspire a reshuffling of tech workers. Now is the time to double down on your engagement strategy in order to attract IT talent that may be looking your way for the first time.