Over the past few months, tech companies as big as Amazon, Meta, and Netflix laid workers off by the thousands. And announcements of job cuts keep coming.
Despite the gloomy headlines, however, tech layoffs aren’t actually that big of a deal for the economy as a whole. The need for tech talent remains steady across other sectors and tech hiring is still strong, as per the recently released US jobs report. So, the question we should ask ourselves is: Why are these companies laying these people off?
In today’s episode, Dylan discusses the recent tech layoffs and their many nuances, quiet hiring, and US labor productivity.
- [02:33] Why layoffs are inherently emotional
- [04:32] How expecting a recession can trigger a recession
- [07:57] Why tech companies’ profits are going down
- [14:35] On quiet hiring
- [17:06] Why US productivity growth is so slow
- [21:51] On the importance of working for yourself
[00:00:00] Intro: Forget get the civilized path. It’s time to break the chains of debt and dependency, take control of our financial lives, and live free. This is the Fiscally Savage Podcast.
[00:00:16] Dylan Bain: Hello and welcome to Fiscally Savage. I’m your host, Dylan Bain. And today, it’s Friday, which means that I’m gonna take something that’s in the news and get to the bottom of it. And today, I — this was actually one was kind of hard for me to come up with something to talk about mostly because it’s not that I didn’t have a lot of topics that I could have talked about. It’s that most of the topics that were in the news, like the election of the speaker of the house or all the fallout thereof, they’re not things I actually want to talk about because I don’t want to have to, you know, purify my eyes with bleach after reading all that political garbage. So, instead, I’m gonna talk about layoffs because they’re a hot topic in the news. And in the ecosystem that I exist in, people keep bringing up the tech layoffs. And I started asking people and saying, hey, where did you hear about tech layoffs? Like where did you get the term “tech layoffs?” And it’s always, they read it in the media; they heard it on the radio.
[00:01:13] Now, I’ve said this before, I will say this again. The media has an agenda. That agenda is to make money and nothing sells quite like fear and outrage, which means that when Amazon sneezes, the media reports that it’s a corporate version of an airborne Ebola virus come to kill us all. That’s not to say that Amazon laying off I think it was 18,000 employees is or like not bad. But in the grand scheme of what Amazon hired over the pandemic, it’s not as bad as it sounds. And so, when you look at like the grand scheme of things, for a company the size of Amazon, 18,000 employees is not a huge deal. Now, every one of those is a person who’s trying to survive in this world. And the American system, there is no bottom. And so, what they’re always threatening you with if you don’t go get a job is abject poverty and homelessness. So, like for those 18,000 people, this is a really big deal and it’s pretty bad. And for the economy as a total whole, it’s not that big of a deal. And so, the question that we should be asking ourselves is: Why are these companies laying these people off? Is it a huge big issue? Is it the corporate version of an airborne Ebola virus come to kill us all? Or is it something else?
[00:02:33] And so, I’m gonna start off by just pointing out a topic that is the core of Fiscally Savage and that is the idea that money is emotional. And layoffs figure into this because yes, they’re emotional on the backside for the people getting laid off, but they’re emotional for the people doing the laying off. And I don’t mean that the managers are like crying into their bonuses because they feel so bad. No, no, no. See, it turns out, companies function in an economy. That economy functions on money. And money is emotional, which means that companies actually have an emotional charge themselves. Why? Because they’re run by people and people are emotional. And those companies are controlled by investors who are also people who are also looking at their money and therefore, are also emotional. The whole system is running on emotion. Like quite literally, the entire US stock market operates far more on people’s emotional charge at any given moment than it does on anything actually technical or foundational. So, keep that in mind as we go through this; that money is emotional, which means that the companies and the investors and everybody who works in them are making emotional decisions and they have to trust it up in some sort of logical framework so that, you know, it looks like they didn’t make an emotional decision because we all know that emotional decisions aren’t necessarily the best things in the world.
[00:04:01] So, when companies lay off people, a lot of times it’s either because they’ve recently been purchased by somebody, typically a hedge fund or a private equity firm and those firms are trying to restructure the company, cut some fat. That’s the term that they use when they say to empower some of the employees. And that’s not what’s going on right now. What’s going on right now is the other form in which companies are expecting a recession, which weirdly enough can actually trigger a recession if enough companies do that.
[00:04:32] Let me explain how this works. If we have enough of an expectation of a recession — and this is one of these things that’s just kind of bonkers to think about because why do we expect a recession? Because a bunch of people start saying, my god, there’s going to be a recession. They’re not looking at the jobs report, which is really good. They’re not looking at wage growth, which has been really good. They’re not looking at economic recovery or supply chains starting to actually function again globally. They’re saying this because they emotionally have convinced themselves that everything is gonna go down. That doesn’t mean that it’s not going to anyway. It just means that these people have this charge about them. The media, which has an agenda and knows that outrage and fear sells, then puts it on the front page. And then the person who said, oh my god, there’s going to be a recession reads in the media that quoted them saying, oh my god, there’s gonna be a recession. And then they look at it and go, a-ha, I was right; there’s gonna be a recession. And then they call in their managers and say, each one of you needs to cut your staff by 10%. So, they’re laying people off in expectation of a recession, not necessarily because a recession actually occurred or is occurring. And this is why I’ve said this before, like this is the most maddening period of time I’ve ever looked at in terms of economic data because all of the economic indicators that we rely on are all pointing in radically different directions, so I am actually not convinced that anybody, myself included, actually knows what’s going on, but I digress. The companies start laying off people and therefore, those people are now gonna scramble to go get jobs, which means they’re not gonna be spending money. And then the company goes, oh, no. My profits are down because people aren’t spending money. The newspapers report that people got laid off, so then the people who read those newspapers then decide — well, if anyone reads newspapers. Maybe they put it out on whatever, however you consume media. How about that? The media source says that their layoffs occurred and therefore, the people who read that go, oh, maybe I should cut my spending. And then the company goes, oh, no. My profits are down.
[00:06:25] You see how this can be a cycle and a self-fulfilling prophecy, whereas if we didn’t just start ringing the alarm bell in the first place, we might have been okay. But ladies and gentlemen, this is how cycles start. And if you wanted a great example of a cycle that spun right the fuck out of control, you can go look at the Great Depression because this is basically how this went down, too. Things started going a little bit bad and then people panicked and they made it a lot bad and then they made it worse because they were panicking about how bad it had gotten. And then when it finally got to the bottom, everybody was in a state of fear and scarcity and therefore, nothing moved anywhere. And this is why whenever we see a downward cycle, there is a huge urge for the government to step in and do something to stop it or to restore faith in the markets because if they don’t, there can be a run on everything that can create a cycle that’s going to push us down when there was no reason to it because demand was high, wages were okay. But this goes back to FDR’s quote. The only thing we have to fear is fear. This is what he’s talking about — people getting freaked out and turning into herd animals and then taking out the economy. And I think, ladies and gentlemen, what we’re seeing is a smaller version of this. No, I don’t think that there’s gonna be a gigantic catastrophe over the horizon. I made that point abundantly clear. What I do think is that we’re going to experience a downward in the business cycle. And I do think corporations are laying people off on expectation of weakening demand because of some headwinds that are on the horizon.
[00:07:57] And so, it’s worth noting that the vast majority of these companies are profitable. Corporate profits are wildly high right now. And as we’re heading into this — so, I’m recording this beginning of January, which means that Q4 for 2022 is closed and we are going to be getting the 10-Ks, which are the annual financial statements from corporations over the next quarter. So, we’re gonna see did these companies know something we didn’t? That is, are their profits going down? And it has been noted by many other outlets that the case of tech companies specifically — and that’s where the layoffs have been — it’s probably expected that the tech companies are going to be down on a profit level. Why? Well, it turns out that when we opened up from COVID, all of us who kind of like became indoor cats over the whole COVID pandemic and like were just sitting on our couch watching Netflix and ordering stuff from Amazon, when we all wandered out into the sunlight and found out that there were other humans out there and you could go like have a beer with them on a patio, we stopped watching Netflix and ordering shit on Amazon. And what that does, of course, it means that the money we were sending towards the tech companies — and this, of course, is Amazon and Netflix but it’s also Google and Apple and all the other data companies that have all of the data harvesting that they’re advertising to you and trying to, you know, not only collect your data, but target ads and all — all those companies lose out when you go to your local brewery and have a beer with your friends. Like the only people in the tech companies that are benefiting are the geolocation people who track your cellphone and who you’ve come in contact with because your phone moved. Those guys’ jobs are probably safe, but everyone else, their division started to see their revenues down. So, that’s probably what we can expect to see from a lot of these tech companies. Also, like it’s worth pointing out that Facebook, Mark Zuckerberg basically blew a billion dollars out the window on a project that no one really wanted and belief that he was just somehow gonna be able to make it work and it didn’t. And some of those tech layoffs are because, well, you know, they always say that the CEOs get the highest pay because they take the most risk. And if I blew a billion dollars out the window, I probably would lose my job, but Mark Zuckerberg seems like he’s pretty okay and everyone else is suffering for it.
[00:10:16] A lot of the other times when these companies are really profitable and they’re laying people off, what they’re doing is they’re using the expectation of a recession or a recession itself when we are in a recession as cover. Like I said at the top of the show, like everything in this is emotional. Everyone’s making emotional decisions. So, they say, well, there’s a recession or we can at least have the expectation of a recession, so we’ll lay people off and we’ll say, well, you know, we’ll wring our hands and it’s so bad and we’re so sorry to see you go and — but it’s all a cover. And it’s a cover because they can then lay people off and there isn’t — the front page of the newspaper or media source of your choosing is not gonna be “Company cost cuts for own profits and lines their pockets; thousand rendered homeless.” No. It’s gonna say “Recession forces layoffs. Poor company.” And if you don’t believe me, just go pick a media source. Go read the headlines. Like they all read like this.
[00:11:14] It’s really worth noting that if the whole system worked as advertised when these companies were profitable, they wouldn’t lay people off because those people are still adding value into the company. And the fact that the companies are profitable and they’re still doing layoffs really shows you that the company doesn’t care about you. And this goes entirely back to the entire idea of profit maximization. That is the idea that a company’s sole function is to maximize value for the shareholders, which means they don’t see you if you’re the employee as an asset because you’re on the expense side of the income statement. And that’s how they treat you — a cost, not a valued member of the team; not a member of their family; not their greatest asset. They treat you like an expense. The company doesn’t care about you, which is why it goes back to my whole point about like you need to work for yourself, not for the company. Even if you produce great things for the company, do it for you. Do it for the skills that you are going to accumulate. Do it for what it brings to your life. Don’t do it for the company because they will lay you off without a second thought.
[00:12:16] And this all is in a market in which the jobs report that came out recently was surprisingly strong. And I’ve said this before, I’ll say this again. It’s actually not that surprising considering that COVID took out large sections of the US workforce. Between the long-haulers — those are people with long COVID who have been disabled — the women who’d never return back to the workplace when they had to quit their jobs to start taking care of kids and family members, and the early retirements from baby boomers who were like, I’m good. And they just jumped out of the economy. When you take those three groups altogether, you’re looking at an impact on the workforce of about 4%. And this is why like this bothers the crap out of me when I read an article that’s like, where do these workers go? I don’t know. Like you can go to Reddit and find them pretty quickly with the women who are talking about, you know, how they found out they really like staying at home or that childcare is too expensive and they can’t go back to the workplace. Like do yourself a favor and go over to Longhaulers subreddit and find out some people who are in a really bad spot. And then, of course, you know, you can just look at the Bureau of Labor and Statistics and see how many early retirements there are. That’s where these layoffs are part of this, too, is they’re letting people off into an economy that is missing a lot of workers.
[00:13:30] And while we see the tech layoffs, yes, and those make wonderful headlines, what they’re not putting on the front page of media source is the rehiring that’s going on. Every recruiter I know is like salivating over the idea of all these tech workers that have come out and have been really made — you know, let’s use the corporate term — made available to industry. They’re celebrating. Like they’re hiring them as fast as they possibly can. Why? Well, because they suddenly now can compete with the big dogs and these people are coming out with the experiences that these smaller employers have been just dying to get their hands on for years. So, that’s why the job report looks so strong. The US workforce is not what it used to be and a lot of these tech workers are finding jobs fairly quickly. Now, yes, it’s more competitive than in prior years. Yes, there are fewer job postings. But there’s still enough that the jobs report does not look that bad at all, which as long as we’re talking about how layoffs affect the job workers, let’s talk about this other idea.
[00:14:35] So, ladies and gentlemen, you’ve heard of quiet quitting. Now, let’s hear about quiet hiring. That’s right, ladies and gentlemen. We have loud layoffs, quiet quitting, and now we have quiet hiring. It just seems like that we’re gonna be talking about the behavior of a labor market in terms of how its auditory impact is, at least for the next 12 months. So, what the heck is quiet hiring? Stop me when this sounds familiar. It’s asking employees to do more with less; it’s taking the person that you laid off and splitting their job among the remaining employees; or it’s just deciding you’re gonna go shorthanded for a while and expect your current employees to, you know, just pick up the slack. And the response you’re gonna get back from management when you ask, why are you not hiring more people? They say something like, it’s not in the budget. We can’t afford it. Our profits have never been higher. And there’s a recession. You know what I’m talking about. Like we all have seen this. Quiet hiring is when they just take the work of the employee that either quit or they laid off or they got fired and they just distribute their work to everybody else for no more pay. And what a lot of labor economists have started saying is, well, companies have been able to get away with this for years, like since the 1980s. And right now, there’s a big question of in this recessio, whether it happens or not, whether or not the employees are going to be able to continue to shuffle this stuff off to employees.
[00:16:02] Now, remember one of the reasons the job report was so good was that there were three different groups of people who are out of the workforce now due to COVID: long-haulers, women, and early retirements. Those early retirements, baby boomers, they’re the ones who had the miraculous set of bootstraps they could pull themselves up by. And then we, of course, what happened, they were really hard workers. They would take this over and, oh, you should just, you know, go in anyway because your boss really needs you. Like this is one of these things they do. Well, now that they’re out of the workforce, who replaced them? Well, millennials. And if you’ve ever met a millennial, particularly the older version like myself, you know that we’re not exactly happy-go-lucky people. And if you ever wanted to go see what a nihilist looks like, go talk to the Gen Z part of the workforce. Those people typically don’t put up with it. And if the labor market’s hot enough, they’ll just change jobs. So, how long will quiet hiring work? I have no idea. All I know is that I’ve seen it in my own job. I know that my wife has seen it in hers. And I’ve heard a lot of my friends talking about this very thing going on. So, it’s an open question as to what impact quiet hiring will have on people.
[00:17:06] Which brings me to another piece and maybe another mystery that I might have solved. I said like at the top, you know, when economists are saying, where are all the workers? And they’ve just ignored the reality on the ground. US productivity — that is, how much we produce on a per hour basis — it’s flat. It’s leveled off. Like for years, it’s been going up. So, like if you go look at a graph of US productivity, then you’re gonna see it typically it’s with, also with wages and compensation, which will make you depressed, so just be warned. But in the last year or so, US productivity has become flat. And there’s a big question as to why. Now, it is a well-known fact that in the United States, wages have not kept up with productivity since like the 1970s. There’s lots of reasons for this. Please do not jump to the conclusions as to what happened in the 1970s because there are sites that will tell you it’s because we abandoned the gold standard, which we actually technically did not, in the 1970s. Some people will tell you it’s because of tax laws or the pending election of Ronald Reagan. Look, ladies and gentlemen, I could do an entire episode on why I think that wages have not kept up with productivity since the 1970s and today is not the day to do that. My only point is that wages empirically have not kept up with productivity since the 1970s full stop ’cause that’s gonna factor into our story here in just a second.
[00:18:30] So, the question is why did US productivity — with all the advancements in technology, with all the wondrous things we have going on right now, with automated warehouses and shipping and, you know, all the cool stuff — where’s the productivity? Well, one thought — and I have to give credit because it was my wife who pointed this out to me. And as soon as she said, it was like, wow, that is an incredible insight. So, to my lovely wife, if you are listening, this one’s all you. This is not a Dylan Bain realization. This is my wife. Since the 1980s, we squeezed more and more out of the economy and workers. Like that was, the 1980s is when we had this, you know, we shifted our opinion on what role companies were supposed to play in the economy from one where they were, you know, members of the community to one where their sole thing that they were supposed to do was maximize shareholder value. Like that’s when that change occurred. And it was also during that time where like we weakened antitrust laws allowing for the consolidation of just tons and tons of industries and we just squeezed the economy and tried to get every last nickel out of everything.
[00:19:38] But there’s only so much monetization that you can do of every aspect of life before there isn’t anything left and before people get really sick of it. So, when you couple the idea of wages suddenly being stagnant — and this is during the time of my entire life. There has never been a day in my life in which wage growth has kept up with US productivity growth. Like just stop and think about that because I’m in my, I’m 40. And so, when you think about that and then you get to Gen Z, you know, the people who were born in 1996 and after, they’ve never seen it. Like for me, it was this wondrous story that people would talk about, like my parents and my grandparents. But Gen Z never saw it at all. Now, you couple in with this idea of quiet hiring where, oh, well, you know, Joe Schmoe, we laid him off and we’re gonna take his job and we’re gonna divide it among all of you, so you’re gonna have to work more. Therefore, each one of you needs to be more productive. And that’s gonna make us more money as a company but we’re not gonna give you any more pay. So, like no raises this year. We can’t afford it. But record profits again. Yay, guys. Go team.
[00:20:44] People have their limits. And when you start to create an environment that stresses people out where you’re expecting to work over and over and over again without added rewards, they start to do things that are not economical to you. That is to say, people are at their limit and therefore, they’re not productive. When you’re asking them to work more and more and more and they have less time to help serve themselves, less time to decompress, less time to be able to like do the things that edify them, they’re just not gonna be as productive. And like as soon as my wife pointed that out, it’s very clear, just like where did all the workers go? Well, there’s long-haulers. There’s women who didn’t return to the workforce and a bunch of early retirements. Why is this a mystery? And I think she’s onto something here. And so, that’s another thing in the news that’s worth understanding that, well, yeah, we have these layoffs, but productivity is flat and your boss has just divided someone else’s job without any additional pay. Is it any wonder that people are not gonna be nearly as productive?
[00:21:51] And so, when we think about this idea of financial sovereignty from our mission here at Fiscally Savage, I advocate that you, as the worker, as my listeners, like work for yourself. Go out there and find ways to work for you, even if you’re a W-2 employee. Because at the end of the day, they might quietly hire you for somebody else’s job. At the end of the day, they’re expecting you to constantly be able to produce more and more and more. And they’re not gonna share it with you unless you can actually find a way to get it from them. You have to make the case. You have to jump up and raise your hand and say, no, I’m worth that. And here’s the skills that I have. And when they say, well, no, I can’t do that. Well, there’s a corporate ladder for a reason. There’s an entire employment ecosystem out there. This is how we get ahead and we all know it. And at the end of the day, ladies and gentlemen, you might not want to think about this stuff. But the people running the businesses that you depend on for a paycheck, you can bet your bottom dollar that they think about this. And so, as always, we are playing a game and that game has rules. And it behooves you to know those rules and play that game well so that you can improve your life, take control of your finances, and live free.
[00:23:13] Outro: Thanks for listening. If you like what we do here, please hit that subscribe button. Leave us a rating and review. And share the content with somebody who would benefit from the message. You can follow us on Instagram, Facebook, and Twitter, all @fiscallysavage. And head over to fiscallysavage.com to get our free tools, suggested reading, and everything else you need to take control of your financial life and live free.