HACKER Q&A
📣 piratesAndSons

When will you be concerned on layoffs?


In recent weeks, I have noticed a lot of tech companies announcing layoffs due to AI. As this continues, when will you be concerned?

Microsoft laying off 10% of their workforce, 15%, 20%, 30%? Google laying off 10%, 15%, 20%, or more?

HN readers like to use the cope of "it's just pandemic over-hiring" — when do you think that explanation will no longer hold?

When will you say: "Now it has nothing to do with Covid-era over-hiring; the industry has fundamentally changed."

If this happens and a significant number of white-collar jobs are eliminated, who would buy things to keep the economy funded?

  👤 maltalex Accepted Answer ✓
An alternative explanation for this “over-hiring” is that many companies’ operating expenses have grown substantially because of AI spending. Companies can either eat the additional expense, hope AI adoption offsets it, or cut costs.

For most software companies, operating expenses are mostly wages. So, cutting costs means reducing headcount, which is likely especially true in lower-wage regions. If an engineer costs $4K/month, adding $1K/month in token costs increases employment cost by 25%. If an engineer costs $2K/month, the same $1K raises costs by only 5%.

So, I'd argue that everyone should be worried at least to some degree until the industry finds a new equilibrium.