“Six months ago, if you were a developer, you could ask for anything,” Nikita Gupta, a Big Tech recruiter in Seattle and the founder of a job-search company called Careerflow.ai, told Insider. “Companies were closing their eyes and doing whatever they could to get the person hired.” No longer. “Now the companies that are hiring are taking weeks and months to fill roles and they want to make sure they hire the cheapest person,” she said. “It’s ‘take it or leave it.'”
Heather Colvin, who recruits for technical jobs at small- and medium-sized companies around the US, speculates that the recent tech layoffs might, in part, be a recognition by many larger tech companies that they not only over-hired but that their payrolls were too costly relative to the market.
“Some of these companies were hoarding talent,” she told Insider. “And I think some have recognized that they were paying above-market value for people.”
Colvin predicted that there would be “a reset in terms of compensation” not only in pay but also in the incentives that companies offer — “the benefits, sign-on bonuses and equity, and remote work,” she told Insider.
Some on TikTok and Reddit have posited that the “real reason” tech companies are cutting jobs is to tamp down fat salaries bloated by the Great Resignation.
It might sound like something of a conspiracy theory, but it might not be as outlandish as it seems. Tech companies scrambled to meet demand and went on a hiring binge during the pandemic. Reports show that Amazon and Meta, both doubled their head count during that time; Microsoft and Google boosted their employee base by more than half.
The competition for talent, in turn, drove up salaries. At a time when wages were climbing at the fastest pace in decades across the board, tech companies were especially generous to new hires — and even existing employees. Last February, for example, Insider reported that Amazon increased its base-pay cap from $160,000 to $350,000.
The massive layoffs, which reportedly included highly paid managers at Google, could be a way for companies to reset their pay ceilings when they rehire. A year and a half ago, compensation was a “completely different ball game,” a former recruiter at Google told Insider.
One telling data point: According to an internal memo obtained by Insider’s Eugene Kim, Amazon is only hiring students or new graduates for its entry-level software-developer jobs. Neither the memo nor Amazon’s spokesperson clarified why the company believes campus hires are better than experienced candidates, but it’s possible Amazon is targeting a younger and cheaper group of workers, as “experienced engineers tend to command a higher salary,” Kim reported.
Aaron Sojourner, a senior researcher at the W.E. Upjohn Institute for Employment Research, said that “certainly, layoffs reduce workers’ bargaining power.” A spokesperson from Amazon begs to differ: “This speculation is entirely false. Role eliminations did not significantly change our overall compensation costs, and, unlike other companies, we are not reducing any employee’s pay. We remain committed to our compensation philosophy as a means to attract, retain, and motivate employees.”
“The days of expanding and offering richer and richer compensation to try to attract more and more talent to the sector — that’s on pause right now,” Sojourner said.
