At the end of 2022 as the holidays approached, people sought to reconnect with loved ones and hoped to close out the year on a positive note. It’s been such a tough few years with the pandemic and inflation, but finally things seemed to be normalizing.
But instead of showing compassion over the plight of workers, many bosses dropped a bombshell by announcing large layoffs right before the end of the year. This is a pattern unique to the United States, where a lack of legal protections means most employees can be let go at any time. This time the cuts were mostly at technology and financial companies.
Big businesses have been flying high for the last few years, with profits off the charts. But darker economic clouds are on the horizon, and some employers are rushing to make workers prop up their bottom lines.
Who’s being hit. Just six months ago, bosses barely uttered the word “layoffs” in any industry. Job openings were starting to decline, but companies were hiring, and many workers were quitting, resulting in relatively flat levels of employment. Then at the start of the fourth quarter of 2022, layoff announcements started to pick up steam.
The percentage of dismissals for many companies have been in double digits. They overwhelmingly affected higher income administrative, professional and technical staff. Several smaller startup technology companies were involved.
But much more prominent announcements came from Meta (13% of its workforce, 11,000 employees), Amazon (roughly 18,000 employees), and Cisco Systems (5% or 4,100 workers). Just three days before Christmas, Micron announced that 10% of its employees or 4,800 people would be laid off. Other notable companies were Citigroup, Morgan Stanley, CNN, Buzzfeed and Snap.
Then there was the draconian ego trip of Elon Musk at Twitter where he cut or pushed the resignations of more than 75% of the staff, putting the survival of the entire company at risk.
The rationale for layoffs from company leaderships wasn’t very specific, but along the lines of Amazon CEO Andy Jassy’s comment that, “The economy is in a challenging spot, and we’ve hired rapidly the last several years.” However, a look at the financial statements of select companies tells all.
To be clear, they are mostly not losing money, they are just making less than 12 to 18 months ago. As an example, Amazon’s net product and service sales were up 15% in its most recent earnings release (and it was a nearly $500 billion company at the end of 2022), but its net income (profits) decreased 10%. Meta’s net income decreased by 52% in its most recent release and had declined for the last four quarters.
But both companies are sitting on a ton of cash (which allows them to pay dividends, buy back stock and make long term investments). So they are not going anywhere, but their cash reserves are declining.
Why now? The claim is that the timing is only because earnings reports are quarterly and terminations are a financial necessity at the end of the year. But clearly, since most companies are still doing fine, these decisions are discretionary.
In the U.S., businesses find it easy to sack large numbers of personnel on short notice because “at will” employment dominates, so bosses don’t even have to justify layoffs, as they do in other developed countries.
Decades ago, when a much higher percentage of employees belonged to unions, capitalists used to maintain an image of caring about workers and their communities. Management might have waited until just after the holidays to make these kinds of announcements. Now they don’t bother. In 1954 almost 35% of workers belonged to unions. In 2021 unionization was only 10.3%.
The fact that none of those laid off are represented by unions makes them a special target. In other words, bosses do it because they can.
Management looks at wages as just a line-item expense, like inventory or rent. It tends to make decisions on a purely financial basis. However, it is important to look beyond that capitalist viewpoint.
Marxist economists uncover the reality, which is that workers’ labor is the source of all profits. Profit is literally the difference between the value that workers create and the wages they are paid. Bosses may push the remaining labor force to work longer or faster, but there are physical limits to that. So when bosses cut jobs, they inevitably cut their own profits. They end up not making the gains they expect.
Capitalist class warfare. Aside from short-term monetary considerations, there is another unstated dimension to the announcements, and that is to regain leverage over workers. The estimate for the total of layoffs is just over 100,000, which is less than 1% of the “professional/
technical” workforce of 65 million people in the U.S.
Relatively speaking, these are not big reductions, but they have focused on a more affluent strata of the working class that up to this point has been much less vulnerable.
Over the last two years, employers have hired these types of workers at a fast pace and a high price. Consequently, employees have gained some good benefits, from large signing bonuses to flexible working conditions, hours and locations. Bosses don’t necessarily mind these benefits. But slashing jobs sends a message about who is really in charge.
Capitalism has once again demonstrated its heartlessness. But the economic returns that were the excuse for inflicting the pain on former and current employees who are suffering are unlikely to be realized.
And hopefully afterwards, workers in this sector will take a closer look at unionizing.
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