Most of those laid off from the technology industry have since landed on their feet, even if they have had to switch industries and make compromises, experts say.
According to Layoffs.fyi, which tracks tech sector dismissals globally, nearly 220,000 employees were let go in 2023, surpassing last year’s total of almost 165,000. According to founder Roger Lee, companies headquartered in Canada laid off about 4,000 workers in 2022 and so far in 2023.
While some laid off tech workers with highly sought after skills are quickly finding similar jobs with competitors, research suggests many are moving on to smaller firms, finding technical roles outside of the tech industry, starting their own businesses or taking on contract positions.
A study by LinkedIn in April found that nearly 36 per cent of Americans who left roles in the technology, information and media sector found another job in the same industry, down from 42 per cent in 2022. More than 20 per cent found their next gig in professional services, 8 per cent moved to financial services, and another 8 per cent went into the manufacturing sector.
“The U.S. and Canada show similar trends,” said LinkedIn senior economist Kory Kantenga. “Like the U.S., we have seen a rising share of displaced technology, information and media workers moving out of larger technology firms and into smaller firms in other industries, rising from 37 per cent in 2022 to 46 per cent in 2023.”
A recent analysis of LinkedIn and Layoffs.FYI data also found that for every 100 tech workers who lost their jobs in 2022 and 2023, 13 started their own company. With high interest rates and limited venture capital funding, many of these entrepreneurs bootstrapped their businesses, leaning on severance pay to get them started, according to Matt Cohen, the managing partner of Toronto-based early-stage investment firm Ripple Ventures.
“We’re seeing people come from SpaceX, AWS, Meta, Stripe, Shopify – very large established companies – who are coming to us saying, ‘I’m ready to start my next company. I’ve been bootstrapping it for the last few months and I’m ready for some pre-seed funding,’” he said. “That person was probably paid $750,000 [severance] and are now using that to fund a team of four or five, and they’re [fundraising] at a much more sensible valuation compared to what they would have gotten a year ago.”
Mr. Cohen said small and mid-size Canadian tech companies are also benefitting from layoffs and downsizing among their larger competitors, whose executives have seen the value of their stock options, equity, bonus pay and commission diminish during the slowdown.
“Usually there’s no chance you’d get this person, because they’re working at a series C-plus company, making tons of money, and their options are worth a lot of money, and they’re not going to walk away from that to work at a Canadian tech company,” he said. “Now the equity portion might not be worth as much, and the other parts of their [bonus] compensation might not be reachable, so now [smaller companies] they’re in the conversation.”
Some who aren’t finding opportunities with smaller tech companies or at non-tech firms are instead opting for contract positions or fractional roles (multiple contract and part-time positions in lieu of a single employer), according to Joe Diubaldo, chief executive officer of Toronto-based Clarity Recruitment.
“What increased for most [tech] firms is this special projects and interim contract work – it grew aggressively in 2022, and it’s still up over last year, despite everything else being more challenging,” he said.
With an uncertain economic outlook, Mr. Diubaldo said more organizations are opting for shorter term contracts to guard against future budget crunches. That may require workers to split their time between multiple part-time roles or accept more precarious employment to continue working in the industry at their prior compensation level. Others, however, might have fewer options.
According to Sarah Doughty, the vice-president of talent operations for Ottawa-based tech recruitment firm TalentLab, the pandemic hiring boom led some employers to hire workers they might not have considered otherwise, some of whom now struggle to bounce back from layoffs.
“There was such competition for talent that we were seeing employers drop their bare-minimum requirements quite significantly,” she said. “There is a segment of the population in tech that is going through a natural reset, where they maybe didn’t come to the industry with the skills they needed, or their salary was inflated because of outside competition, who are now coming out of a layoff thinking they deserve more.”
Ms. Doughty estimates this segment makes up about 10 per cent of the laid off population. She adds that most of those who were let go instead worked in underperforming business units that would have been cut eventually.
“You have these very large companies who have multiple positions, and some of those positions have just not been profitable, and whether we had a recession or not, they would have had to deal with them eventually,” she said, emphasizing that the layoffs haven’t been as bad as some headlines suggest. “We’ve been in business since 1998. This is not our first recession – we’ve been through lots of ups and downs – and in our experience this recession is very soft compared to 2009 or the early 2000s.”