We should worry about the mounting tech layoffs. They could literally kill

Amazon. Meta. Google. Salesforce. Microsoft. The list goes on. More than 200,000 people were laid off just in the technology industry alone, a number that is growing rapidly. Weren’t these the same companies that less than 18 months ago were paying recruiters and search firms fees—and employees signing bonuses—to add staff? Of course.

Companies seem to have perfected the art of buying high—hiring in the middle of booms—and selling low, eliminating positions at the first sign of economic weakness. None of this makes sense, although it does exact a toll, particularly on the people.

So how to explain the madness?

Follow the crowd

As Arizona State social psychologist Robert Cialdini noted in his bestselling book Influence, people—and this includes executives—use shortcuts to economise on the effort they spend thinking and decision-making.

One such shortcut is relying on social proof—what others do—as a guide to one’s own behaviour. After all, we believe in the wisdom of crowds, and if many other people—or businesses—are doing something, what they are doing must be sensible.

Cialdini’s argument is consistent with other logic. The evidence suggests that when people are confronted with uncertainty, about what to do or what to believe, they look to others for cues.  This theory of informational social influence dates from the 1950s, but remains as relevant today.

And then there are conformity pressures. People conform to what others are watching, eating, wearing, and so forth, because to be different is, in a word, to stand out and people, in order to get along, often prefer to fit in. A good way to fit in is to follow the crowd.

Social influence, conformity pressures, and social proof have been well-studied and frequently demonstrated. Why would we think, just because someone has an executive title and works in an organisation, that the person would suddenly be immune to widely-documented, well-established social verities? Of course, they’re not.

Many, indeed virtually all, of the tech companies that have announced layoffs are still making money. They may be doing layoffs in anticipation of economic hard times, and to maintain their profit margins. But few, if any, of the companies announcing layoffs are on the verge of going out of business. In that sense, their layoffs are discretionary.

Deadly consequences

Much of the data supports the assertion that layoffs, which result in job losses for those laid off, are bad for not only the people who lose their jobs, but also for their surviving colleagues, and even for the managers conducting the layoffs.

Layoffs increase both sickness — morbidity, and death — mortality. Not just in the US, but in every country where they have been studied. Job loss results in poorer physical and mental health. One study found a 44 percent increase in mortality risk during the first four years following job loss. Why?

People are more likely to engage in unhealthy behaviours, such as drinking excessively, smoking more, and overeating after losing their jobs. We call it comfort food for a reason. Job loss causes stress, and the effects of stress on ill health are well-studied. Stress and depression are themselves correlated, and depression also is associated with unhealthy behaviours as well as changes to the endocrine system that adversely affect health.

As just one out of numerous studies, consider research by sociologist Kate Strully. Using a longitudinal data set to study the effects of job loss over time and to better assess causality, she found that the effects of job loss on ill health were similar for blue- and white-collar jobs. Strully found that job loss results in an 83 percent increase in the likelihood of reporting a new health condition. Moreover, the negative effects of job loss on health persisted even if the individual was able to find a new job.

Surprisingly few positive consequences of shedding jobs occur for the companies that lay people off.

Often, they wind up hiring laid-off employees back as contractors. Networks of internal relationships that help foster innovation get disrupted. Productivity can go down as people withhold discretionary effort, gossip about who is next on the chopping block, and the best employees head for the exits before they lost their jobs. Even stock price seldom increases as a result of announcing layoffs.

Layoffs impose substantial behavioural and physical health costs on those laid off, but also on survivors and the managers doing the layoffs. They provide few benefits to the companies doing the layoffs, as they do little to increase revenues, enhance customer service, or foster innovation.  

As such, layoffs create mostly losers.

Layoffs result in important respects from imitative behaviour as companies copy what one another is doing in the process of social influence, seeking to conform to what everyone else does.

Imposing health costs while not solving fundamental business issues, all the while setting in motion dimensions of economic contraction that just make the economy worse, strikes me as a harmful and counterproductive way for employers to act.