Mass Layoffs Reasons and Impacts on Job Market

Although the year began with promising economic signals, including low rates of unemployment and slowing inflation, several large companies have announced staff reductions. Currently, the media industry is facing a major blow. The Los Angeles Times has recently announced the laying off over 20% of its newsroom staff, the most considerable workforce reduction in the company's long history. 

However, the media industry is not the only one facing challenges. Prominent companies like Amazon, Nike, Citigroup, and Intel have also revealed intentions to cut workforce this year. According to Layoffs.fyi, which tracks job cuts, 21,370 employees have already been laid off as of January 2024.

It is very important to remember that there are human beings behind these layoff numbers. They might look like items on a spreadsheet to investors, but they have families and bills just like everyone else. - Art Shaikh

Experts warn that the trend of mass layoffs is likely to continue as businesses seek to adapt to the changing landscape of the global economy. Some argue that there are still new job opportunities emerging in the areas of cybersecurity and data analytics.

PissedConsumer interviewed experts in economics, law, tech, career, and employment to get a different perspective on layoffs and their impacts.

• Reasons for mass layoffs
• Does AI impact layoffs?
• How layoffs impact the job market
• What are employees' rights after a layoff?
• How do layoffs impact the morale of employees and companies?

Reasons for Mass Layoffs

The current job market has become increasingly unstable due to a variety of factors, including economic uncertainty, COVID-19, technological advancements, and industry changes. Many companies are facing financial challenges and choose to reduce their workforce through mass layoffs to tackle them. Here experts explain the reasons behind such decisions. 

“Layoffs are a common response to economic downturns or changes in market demand…,” says Matthew Warzel, a certified resume writing expert with MJW Careers. “The COVID-19 pandemic has had a significant impact on employment, with many businesses struggling to stay afloat and reduce costs. While some industries and companies have started to recover, others continue to face uncertainty, which may result in additional layoffs in the future.”

Prof. Stephen M. Miller, Director of Research, Center for Business and Economic Research (CBER) at UNLV, also believes COVID-19 has affected the job market, which later led to mass layoffs but in a different way. 

“The pandemic caused a dramatic shift in work patterns with much less face-to-face and much more on-line interaction. Moreover, since many people were isolated at home, the use of social media increased significantly,” explains Stephen Miller providing that the demand for online services rose and “tech companies bulked up their labor forces to meet the increased demand for services.” 

Now once COVID-19 has slowed down, it caused the reverse action. As Prof. Miller notes “the pandemic reduced its stranglehold on the economy, the distribution of face-to-face and on-line economic activity partially reversed itself and social media activity decreased. Thus, the extra hiring by the tech companies also partially reversed itself, leading to "mass layoffs." 

Dr. Kyle Elliott, an employment expert, founder and career coach behind CaffeinatedKyle.com also believes that companies lay off employees as the result of internal processes and strategies. “While every reduction in force is unique, mass layoffs are often a cost savings strategy used by large, publicly-traded companies to protect their bottom line, improve share prices, and restore shareholder trust, particularly during challenging economic times. Mass layoffs are also an opportunity for companies to quickly reshape their workforce to realign with new, or updated, company priorities,” says Dr. Elliot.

Does AI Impact Layoffs?

There is an ongoing debate about whether the increasing use of AI technology such as ChatGPT is a direct cause of the recent wave of mass layoffs at major technology companies, including Google, Meta, Microsoft, and Amazon. While some experts argue that the adoption of automation and other forms of AI is helping these companies cut costs and streamline their operations, others maintain that the relationship between AI and job cuts is complex and varied. 

Art Shaikh, Founder and CEO of DigitalWill, says, “AI is not the reason behind these mass layoffs at Google, Meta, Microsoft, and Amazon. These layoffs were made for two reasons: First, tech companies over-hired during the pandemic shutdown, so they needed to cut their surplus labor and secondly, investors have been pressuring leadership to cut costs. AI will be used as a tool, but can't replace the workforce.”

Matthew Warzel expresses a similar opinion and also adds that “In cases where jobs are being replaced by machines or automation, it may be necessary for workers to acquire new skills or transition to new roles or industries.”

Matthew further explains it with an example when “a cashier being replaced by a self-service machine, workers in that field may need to consider transitioning to roles that are less likely to be automated, such as customer service or other customer-facing positions. Alternatively, they may need to acquire new technical skills related to the maintenance or operation of self-service machines or other forms of automation.”

How Do Layoffs Impact the Job Market?

Layoffs have a significant impact on the job market that may result in a sudden increase in unemployment rates. Mass layoffs can also cause a ripple effect in the economy, as they can lead to reduced consumer spending and lower demand for goods and services. 

“It is possible that we may see a surge in job seekers as a result of recent mass layoffs, especially in industries that have been hit hard by the COVID-19 pandemic,” says Matthew Warzel. “However, it is difficult to predict the exact impact on the job market, as it will depend on how quickly the economy can recover and how many new jobs are created in the coming months and years.” 

Art Shaikh also comments that “As more talent floods the market, it should help other companies facing labor shortages, which is why we aren't seeing significant increases in the unemployment rate, yet." 

Dr. Kyle Elliott, an employment expert and career coach further notes that we may not see an immediate impact of mass layoffs on the job market. “Not all workers impacted by layoffs immediately look for their next role, so it often takes several months, if not longer, to see the full impacts of layoffs on the job market,” Dr. Elliott says. 

Still, there is a positive side to the situation. Prof. Stephen M. Miller says, “The good news is that layoffs are coming when the job market is still hot. That is, more jobs currently exist than people looking for work.”

“The pandemic caused the federal government to provide significant additions to the safety net for those unemployed,” says Prof. Miller. “For example, one of the first changes offered $600 per week in extra unemployment benefits. (For a 40-hour work week that translates into $15 per hour.) Laid-off workers paused and reevaluated the work they had been doing and many decided to change jobs. This restructuring of the labor market continues.”

What Are Employees’ Rights After a Layoff?

It is essential that both employees and employers have a clear understanding of the laws and regulations specific to their jurisdiction. Both parties should take appropriate steps to ensure a fair and legally compliant layoff process. 

“In general, employers don’t have to give any notice in advance of a firing or layoff,” explains Donna M. Ballman, P.A., an Employee Advocacy Law Firm. “However, if it’s a large layoff, then the WARN Act applies. Under that law, employers must provide written notice 60 days before the date of a mass layoff or plant closing. If they don’t, you might be entitled to damages for back pay and benefits for up to 60 days, depending on how many days’ notice you actually received,” says Donna M. Ballman. 

“Employees are protected by WARN if their company has 100 or more full-time workers (not counting workers who have less than 6 months on the job and workers who work less than 20 hours per week), or has 100 or more workers who work at least a combined 4,000 hours a week,” notes Ballman. 

An employee-side lawyer explains that “WARN protects employees if there is a plant closing, where the employer shuts down a facility or operating unit within a single site of employment and lays off at least 50 full-time workers; or if there is a mass layoff where the employer lays off either between 50 and 499 full-time workers at a single site of employment and that number is 33% of the number of full-time workers at the single site of employment; or where the employer lays off 500 or more full-time workers at a single site of employment.”

How Do Layoffs Impact the Morale of Employees and Companies?

The other side of mass layoffs that isn’t discussed much is the way they impact the morale of both employees and employers.

When it comes to companies, Matthew Warzel says layoffs “have a negative impact on employee morale and engagement, which can make it more challenging to retain existing talent and create a positive workplace culture.” 

Warzel adds that for employees “layoffs can also have a psychological impact, leading to feelings of uncertainty or anxiety about the future.” However, he also points out that “With the right mindset and approach, workers can use the experience of a layoff to take stock of their skills and interests and make strategic decisions about their careers.”

Art Shaikh explains that companies treat mass layoffs as strategic actions. "Headcount is the one expense companies can completely control, and investors often demand that costs be reduced. Mass layoffs can be seen as cruel by the general public, however, many would consider it the 'cost of doing business'.” Still, he also suggests that there are downsides for consumers as “Customers will obviously suffer as a result of less staff being available to help them.”

The recent increase in mass layoffs across various industries highlights the challenges that businesses face. By understanding the reasons behind these job cuts and taking a proactive approach, employees can better prepare for the uncertainties ahead.

Have you experienced job cuts? How do you think which companies are the next to follow the mass layoffs? Share your experiences and insights in the comments section below the article. Your input is valuable and helps create a more comprehensive understanding of the current job market and its issues.