Lifestyle

Who Benefits From The Layoffs?

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2024 is shaping up to be another tough year for workers in the United States. Last year, tech companies laid off thousands of workers. This year, the layoffs are spreading to other sectors. UPS, Amazon, Nike, Microsoft, Google, Mattel, American Airlines, and many other companies announced layoffs recently. Managements are anticipating a pullback in consumer spending and they are trying to cut costs.

As Meta’s CEO Mark Zuckerburg explained, the layoff in 2023 was due to Covid adjustment. Meta hired too many new workers during the recovery and they needed to trim back. It worked so well that they are continuing with layoff this year to become “leaner.”

Leaner and Meaner

Oh man, this brings back memories. I went through many rounds of layoffs when I was an engineer. Companies laid off a ton of workers during the Dot Com Burst in 2000 and the Great Recession in 2008. Management always wants to be leaner and meaner. It’s tough on the workers, though. After a few rounds, the remaining people aren’t just leaner and meaner. They are “skinny and pissed”, as Dan put it. (Dan was an old grizzled veteran of the semiconductor industry when I was just a young buck.)

Many workers are probably at this point today. Clearly, layoffs aren’t good for the rank and file. It’s hard to find a job when so many companies are cutting back. The remaining workers are demoralized and need to work more than ever to cover their old coworkers. Layoff is terrible for workers.

Do shareholders benefit?

But layoff is good for the shareholders, right? Meta’s stock price doubled in 2023 and it is continuing to go up this year. That’s where many laid-off workers place the blame. However, that isn’t necessarily true. Studies have shown that layoffs do not improve long-term profitability. Companies that conduct mass layoffs tend to underperform their competitors for about 3 years.

Layoffs create a lot of drag. Companies need to shell out for the severance pay and continuing health benefits. Business groups have to reorganize with a smaller headcount and deal with a demoralized workforce. Employees who survive the layoff may struggle with anxiety, insecurity, low morale, and survivor guilt. This leads to disengagement and it’ll lower productivity. Also, companies may need to hire contractors to help out and that can be costly.

Meta did very well over the last 12 months, but we’ll have to wait a few years to see how they do in the long term.

Is layoff good for anybody?

Is layoff good for anybody? Well, it’s great for the people who ordered the layoffs. Last year, Google’s CEO was paid $226 million. Microsoft’s CEO made $55 million, which was a lower year than usual for him. Zuckerberg sold over a million shares of Meta stocks over the last few months and made nearly $500 million. Clearly, the CEOs made out like bandits from all these layoffs.

As a shareholder of these companies, I liked the big pop last year, but I think they should cool it with the layoff. The workforce is getting too lean. Performance will suffer if they continue laying off workers at that pace. Also, I only have 200 shares of Meta. The big pop was nice, but it didn’t make millions for me. I probably should take profit and trim back my position a bit like Zuckerburg.

Anyway, I want to gripe about the heartless executives. They are the main beneficiaries of the layoffs. Workers need to know that. Don’t blame the shareholders. If it was up to me, I’d reduce hours instead of laying off so many people. If the studies are right, layoffs don’t improve profitability anyway. It’s just smoke and mirrors to mask poor performance.

Also, workers need to learn they are a replaceable cog in the machine. Anyone can be replaced. That was my main takeaway from all the rounds of layoff I went through. You have to save and invest as much as you can. Once you achieve financial independence, you can be free from the stress and anxiety of the layoffs.

Good luck to all the workers out there! It’ll be a tough year. Have you experienced layoffs in your workplace?

image credit: Elti Meshau

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.

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