- Tech companies have been slashing thousands of jobs.
- Thanks to the rise of AI, many of those jobs might never come back.
Big Tech is liking the look of its new leaner shape.
Companies from Meta to Microsoft to Salesforce have cut jobs in recent months, often in the pursuit of efficiency and increased profit margins. By some estimates, more than 250,000 tech workers have been laid off since the start of 2022.
There have been many more roles that have gone unfilled as these industry giants slow down on hiring. Recent data from Indeed shows a more than 50% decline in software-development job postings compared to a year ago.
As my colleague Hasan Chowdhury has written, that strategy is working financially, with Salesforce, Meta, and Microsoft recently reporting stronger-than-expected earning results.
And now, thanks to the rise of AI, many of those jobs may be permanently lost, even as these companies get back to growth.
In a recent note by Morgan Stanley analysts led by Brian Nowak, the bank said "AI based productivity drivers are coming."
The note reads:
We have seen headcount reductions across the tech landscape. But part of this (in particular META, GOOGL, AMZN) has been a counter-measure to above-average hiring levels in '21/'22. Looking ahead, we are most focused on how companies plan/speak to forward hiring growth. Forward hiring levels should arguably be smaller and more targeted due to rapidly-emerging AI productivity drivers.
The Morgan Stanley note referenced the potential for AI-assisted coding tools to make engineers more productive, citing a Microsoft exec who said using GitHub Copilot increased productivity by 55%. It also highlighted AI-based sales tools that could reduce the need for huge armies of salespeople.
For more on how AI could impact software developers, I highly recommend this story from my colleague Aki Ito on "the end of coding as we know it."
To be clear, Morgan Stanley doesn't suggest AI will necessarily take tech jobs. Instead, the the spread of AI-powered tools and workflows will slow or stop future growth in head count. In other words, jobs that were lost either won't come back or will come back much more slowly. In the future, some tech-job openings may not even exist.
There are already hints of this. At Alphabet, for example, Google's engineering head, Urs Hölzle, said in a March memo to technical-infrastructure teams that the company would use automation to "find more efficient ways of doing things."
Insider's Rosalie Chan reported at the time:
Additionally, the team aims to use automation to reduce the ratio of site-reliability engineers to software engineers to less than 5%. Site-reliability engineers manage the operations of Google's systems and keep them running, while software engineers work on developing Google's infrastructure and products.
Meta meanwhile has had a broad hiring freeze in place for the past six months. Chief financial officer Susan Li said on an earnings call this week that while the company expects to start hiring again once it has completed its layoffs in April and May, it's "long-term focus is very much on efficiency."
Asked by Nowak how that could impact workforce productivity, she said "it's something we're excited about and I think we will have more clarity on that as more tools begin getting developed to enhance employee productivity across the industry."
This trend has significant implications for tech workers and those hoping to work in the industry. As Insider's Ito has reported, tech workers and software engineers have often been thought of as impervious to the march of automation.
She writes:
Even as new gizmos replaced other jobs, the people who wrote the instructions for the machines felt untouchable. Universities rushed to expand their computer-science programs. Policymakers scrambling to futureproof the workforce stuck to one unwavering message: Learn to code! But in recent weeks, behind closed doors, I've heard many coders confess to a growing anxiety over the sudden advent of generative AI. Those who have been doing the automating fear they will soon be automated themselves. And if programmers aren't safe, who is?