Tech companies shedding jobs as COVID-19 disrupts economy
SAN FRANCISCO (KTVU) - The economic shutdown due to the coronavirus is hitting the tech service industry especially hard. On Wednesday, Palo Alto-based software marker Cloudera became the latest company to announce layoffs.
Less than a decade from the dizzying heights of an initial public offering, many tech service industry companies are now crashing back to earth, hard.
“They’re suffering like restaurants and other business services are suffering right now,” said Carolina Milanesi, a tech analyst with Creative Strategies.
Employees are especially taking it on the chin. Expedia, Uber, Groupon, Lyft Yelp, and Airbnb all have announced their slashing jobs. In a letter to employees explaining its 25% workforce reduction, Airbnb's co-founder said, “Since we cannot afford to do everything that we used to do, these cuts had to be mapped to be a more focused business.”
“The fact that some technology companies need to lay people off, we can’t avoid,” said Dr. Robert Chapman Wood, a strategic management professor at San Jose State University.
He said the current climate wreaks of the dreaded “R-word.”
“That’s how recessions start. They start with vicious cycles, and we’re in one right now,” said Wood.
The economy has cooled to the point of frostbite. Reigniting it will require consumer spending, but there’s little reason for spending now, which is why tech service companies are shedding jobs. This, as some of those companies, have taken millions and billions of bailout dollars from the federal government.
“That money, the Paycheck Protection Program, needs to be going towards payroll, or paying the rent if you can’t afford the rent. But that money should not be going to executive pay or it can’t cover any salary over $100,000,” said Congressman Ro Khana.
Khana said companies that take federal funds and layoff workers must repay the loans, or face severe consequences.
“If there’s fraud involved, or if there’s not [correct] use of the money, that’s very serious consequences. They could be audited, or penalties. They could even be referred to the Justice Department,” he said.
It is little consolation for thousands of workers who once upon a time were enjoying the heights new tech provided. Now only to be without work in an industry and country in the grips of a killer virus.