Profits Over People

About two weeks ago, I sat down to write an article about the layoffs I saw people posting about on LinkedIn. As I sat there writing, I found myself focusing on Tesla, so that article shifted to Elon Musk’s shenanigans; however, I think it is essential to talk about what is going on in the world concerning layoffs. It has been painful to see so many people lose their jobs, especially since inflation is at a forty-year high. Since we are talking about Elon, when he initially announced layoffs, it was believed that he intended to lay off about 10% of his workforce; however, Musk has since clarified that he plans to lay off 10% of salaried workers and about 3.5% of Tesla’s entire workforce. Netflix has decided to lay off 3% of its workforce, and Redfin laid off 8%. According to Layoff.fyi a company that has been tracking tech layoffs since the beginning of COVID, tech companies have laid off 7,400 US employees in the last month (20% of the reported workforce). Layoffs happen; it is the reality of doing business. Companies must conserve resources when they are struggling financially. The problem with some current layoffs is that these companies do not seem to be struggling much; at least that is not the reason they site. Tesla decided to start layoffs because they have over-hired in some areas and Elon has a “super bad feeling” about the state of the economy. Eliminating unnecessary positions makes sense; however, Elon has also stated that he expects to increase his salaried and hourly workforce a year from now. This leads me to believe these decisions are being made in preparation for a recession. Although it is almost certain that we will enter a recession, Elon cannot predict the future and cannot say for sure that it will require drastic downsizing. Redfin laid off employees because they did not have enough work for them and a decline in sales left less money for projects. This makes sense given that they reported their performance was 17% under expectations. However, they recently approved paying their executive’s performance bonuses and continuing their high salaries. This is millions of dollars in compensation for executives that missed their targets. They argue that this decision was made in April before they even began discussing layoffs. Fair enough, but the Fed started raising interest rates in March and announced raising them for the subsequent six sessions. Competent real estate executives should have known an increase in interest rates might impact their business and consider conserving cash to avoid mass downsizing. But who wants to give up bonuses? Especially if you can get one for underperforming. These are just two examples, but there are many more, such as Netflix which had a 200%+ increase in operating income from Q4 2021 to Q1 2022 yet downsized because they lost some subscribers. Many companies are signaling to the world that they are only a great company to work for when things are going perfect. During a boom, they will support employees and offer great benefits, but as soon as things slow, they will cut you. Why would anyone want to work for a company like that? Many of these companies will likely try to increase their workforce in the future, but people need to consider if they want to work for a company that will dump them as soon as they get a bad feeling. Airlines are currently dealing with this. They laid people off during the pandemic despite getting billions in bailout money to avoid doing just that. Now they are forced to cancel flights due to a lack of staff and offer hiring bonuses to bring talent back to work. What is happening to airlines should be a lesson to all of us. Prioritizing money over people may provide short-term relief, but it will likely cause long-term pain. I am not saying that companies should operate at a loss for years, but they should be more financially responsible so that they can support people in the good and bad times. Cutting people at the first sign of trouble is shortsighted. I know some of the layoffs that are happening are necessary. Some companies are struggling and have to decide between downsizing or shutting down completely. In those cases, downsizing is probably the best option because closing the business will cause even more people to lose their jobs and results in less competition in the marketplace. I feel for those businesses and the employees that are affected. But all of the companies just cutting jobs because they are no longer in a growth economy but still have positive cash flow, I hope workers are paying attention and choose to avoid these companies when we come out the other side of this economic situation.