The Impact of Layoffs: A New Era for Job Market?

Introduction:

The recent wave of layoffs in both large and small companies, particularly in the technology sector, has had a significant impact on the job market. With more people now seeking employment, employers are capitalizing on the surplus workforce by offering lower wages for the jobs available. We see as many 480 applications for senior roles on LinkedIn job post. This situation is occurring simultaneously with rising prices, leading many individuals to explore alternative avenues such as starting their businesses or freelancing. Consequently, the market space, including consulting, has become more crowded, resulting in lowered prices. While large companies are in the midst of layoffs, they still require skilled professionals for specific roles, albeit with the implementation of hiring freezes. In this blog post, we will delve into the current state of the job market, the trends arising from the layoffs, and the potential impact on the future.

The Current Scenario:

The recent layoffs in the technology sector have generated a surplus of talented individuals in the job market. This excess supply has given employers an advantage, enabling them to offer lower wages to potential candidates. Interesting to observe is how there are several different ways being employed and how they differ often by company profile. One way is in sales to lower commission payouts, which often is happening in established companies with larger existing teams. Those companies would find it more difficult to have a disparity in base wages, so opt for changes in compensation plans. While smaller companies or start-ups are lowering base wages and trying to attract with higher variable compensation. This is logical as it does impact cash-flow consideration and pay disparity not a major concern in smaller teams. We are yet to see if other benefits will be affected longer term, as the existing employee base is far less likely to vote with their feet in the current job climate.

Unfortunately, this trend coincides with the increased prices of goods and services, creating a challenging financial situation for job seekers. While wages in the technology sector, which is especially affected at this time, were always on the high end, the lifestyle of many would have been appropriate (i.e., higher mortgages etc).

As a result, many individuals are motivated to explore entrepreneurial endeavours or take on freelance work in order to secure their financial stability.

The Crowded Market Space

With a rise in the number of professionals venturing into self-employment and freelance work, the market space has become more competitive. Industries such as consulting, which were historically in high demand, are now facing price reductions due to the increased availability of skilled individuals offering their services. This crowded market forces freelancers and consultants to adapt their pricing structures and find innovative ways to stand out among the competition.

I am writing this while just having started my own consultancy, fractional leadership, and advisory business Alpha BGS Commercial. In the last 6 month I have spoken to many people in this space in Europe and the US, some are consulting or training veterans with 20+ years of experience, others have started recently, like myself. All see similar themes emerge and are looking to differentiate.

Innovative delivery and pricing models are being explored by some. While others rely on their networks, experience, and reputation. Most successful are those that found a niche. This topic may warrant a future blog post (watch this space and follow).

Large Companies and the Skill Gap:

While large companies engage in layoffs, they still require qualified professionals for specific roles. The paradox arises in that these companies are simultaneously implementing hiring freezes. This creates a unique situation where skilled individuals find it difficult to secure employment within large organizations, despite the demand for their expertise. Consequently, the next six months will be crucial in determining whether this trend continues or reverses. It is unfortunate that some companies proudly celebrate record profits, showing off there ‘doing letting g good’ credentials, while letting go their workforce. This is especially disappointing when you see wave after wave of redundancy announcements. Often tenure or performance are completely being ignored.

One consequence of this will be less loyalty from existing and future employees. It also may create a very short-term productivity gain. But this will reverse and turn into large productivity losses. When it becomes less obvious that good work can protect one’s role it will reduce efforts applied. Also, the overall climate and teamwork will be depressed. I would term it ‘a heads down and finger pointing’ culture. I seen this in play out live in the past. From experience I would say that turning this loss of positive culture around will take a long time.

The Future and the Role of Artificial Intelligence:

It is important to note that the rise of artificial intelligence (AI) is also playing a significant role in shaping the job market. Many technology businesses are exploring AI tools as a means to reduce labour costs, which may further impact the employment landscape. While this blog post aims to focus primarily on the direct effects of layoffs and job market trends, it is impossible to completely disregard the potential influence of AI. And though there are many great AI opportunities the predicted impact on the job market is being felt now. The opportunities that AI will created, like so many other technologies and scientific advancements did before, are yet to be showing their impact. The horse drawn cart vs automobile example has truly been overused, while concrete examples for the millions of jobs to be created are still not forthcoming. The clear message is AI is here now and we need to figure out how not just to live with it, but truly how to work and create jobs with it.

Conclusion:

The recent layoffs in both large and small companies, particularly within the technology sector, have caused a surge in job seekers. The consequential surplus of skilled individuals has resulted in employers offering lower wages, while the rising prices of goods and services create additional financial strain. This situation has prompted many individuals to explore alternatives such as self-employment or freelancing, leading to a crowded market space with lowered prices. Large companies, despite implementing hiring freezes, still require qualified professionals for specific roles, creating a skill gap dilemma. The subsequent months will be crucial in determining if these trends will persist or reverse. As the job market continues to evolve, it is imperative for individuals to adapt and find innovative ways to distinguish themselves while navigating the challenges brought about by layoffs and the changing dynamics of the technology sector.