We’re only a couple of months into 2023, and yet we’re already seeing dozens of tech companies that have been resorting to laying off employees by the thousands. Facebook is among one of the most recent tech giants to announce that layoffs would occur, but what does this mean for the average taxpayer? These layoffs of course affect the employees and tech companies that are performing them, but does this really affect those not in the industry? This question is unfortunately not a quick and easy one to answer, so in this article, we will analyze the recent tech layoffs that have occurred across the United States. Upon reading this article, you will understand how these layoffs can ultimately affect you as a taxpayer.
What companies are laying off employees?
Among some of the tech giants that have recently opted to layoff employees are Facebook, Zoom, Github, Dell, Amazon, and many more. These are some rather big names, so it might come as a surprise that they are laying off workers by the thousands. This is different form the recent mass firings that took place after Elon Musk’s purchase of Twitter late last year. The companies laying off employees are doing so due to their profits being lower than they would like/need them to be. Some of these layoffs might be due to business decisions that ended up costing more than they paid off, such as Meta’s overcommitment to their Metaverse, but that isn’t the case for most.
Another big reason behind these recent tech layoffs is of course inflation. Inflation might not be at the peak it reached last year, but it is still at an all-time high. As of writing this article, the inflation rate is currently 6.4%, this is in comparison to the 2.4% in January 2020, or the 1.5% in January 2019. It’s easy to blame this on the pandemic, and it certainly is true that inflation rates started to increase more rapidly after the pandemic, but 2020’s inflation rate peaked at the 2.4% mentioned before in January. It wasn’t until mid 2021 that inflation really started to see an increase. You might even recall hearing about tech companies such as Amazon or Zoom doing really well during the pandemic, as more people were forced indoors where they might use such products and services more often. Consumer spending was also rather high during the pandemic, and while this doesn’t always affect them, tech companies were able to survive. This has unfortunately clearly changed with the current economy, and many workers are now without jobs.
Why does this matter for the average taxpayer?
The average taxpaying American might not think that these recent tech layoffs affect them. Those that aren’t working in a tech company might believe they have nothing to worry about in the midst of the struggle these tech companies are facing. As of 2021, tech made up 7.9% of the total US labor force. While this is a large number of jobs in the long run, it is by no means the majority of workers in the US, so not everyone would think they’re affected by this. There are unfortunately a number of other things to look at when considering these layoffs.
Usually when a business begins doing mass layoffs, it is because they are hurting financially and need to balance out their profits with their expenses. This is certainly the case with many of the tech layoffs that have occurred recently. This is no different for the average retail businesses, but one thing that differs from them is that retail businesses often rely on consumers to balance out the number of profits they lost that required the layoffs in the first place. Some tech companies are able to follow this model, but for many, this simply doesn’t really apply. Some tech companies like Facebook or Yahoo even rely on these retail businesses in the form of ads. This means that retail businesses are often able to survive for a bit longer when it comes to losing profits, and they won’t really need to lay off workers as often.
So how exactly does this all relate to the average taxpayer, and in what way does it affect them? One important thing to remember is that we’re currently in tax season. This means people will begin receiving their tax returns. This will often cause a sort of “mini economic boom,” as people have more spending money. This is where things become a bit more dangerous, as these tech layoffs are serving as a bit of an early warning for what’s to come. As we mentioned before, these tech companies aren’t able to survive without layoffs as long as many retail companies are. Retail companies often need to simply increase sales, which will become much easier during the mini economic boom that occurs during tax season. This is only temporary, however, and many know that there were several signs of a potential recession occurring sometime this year. While these signs have died down a little bit, they are still present, so its best we don’t let our guard down.
What should we do to combat this?
The best thing taxpayers can do to avoid hardship during a potential recession occurring this year is to simply save. It might be tempting to spend the money you receive from your tax return as soon as possible, but just remember that you aren’t the only one with that idea. Research shows that recessions usually occur following a period of above-average economic growth. Such a period could occur as a result of the economic boom that comes with tax season. It’s always a good idea to heed the signs of what might be to come. There are still many experts that believe a recession will occur this year, so it’s best to play it safe. If this hypothesis (hopefully) proves to be incorrect, the worse that could happen is you end up saving money for something potentially important down the line. Remember, company layoffs can be a sign of what’s to come in the future. It’s already happening in the tech industry and could very well become a trend elsewhere.