Drilling into the Data: The Impact of the Tech Layoffs
Updated: Mar 6
What is REALLY going on with the tech talent market? Anecdotes and gloom fill everyone’s news feed, but do you wonder what the data is saying?
The Global Talent Accelerator (GTA) recently hosted a thought-provoking panel discussion on the state of the tech industry, featuring prominent industry leaders. Our very own Kristina McDougall, Founder and Managing Partner of Artemis Canada, joined Charlyne Fothergill, Community & Partnerships Manager at the Tech and People Network. The discussion was moderated by Sean Languedoc, Founder and CEO of the Global Talent Accelerator.
In this blog post, we'll share some of the key takeaways from the discussion, providing valuable insights into the current state of the tech industry and what we can expect in 2023 and beyond. So, let's dive in!
1. We’re experiencing a dip after a bull-run of hiring.
While recent layoffs in the tech industry may cause concern, the overall outlook for the industry remains positive. Companies may occasionally need to downsize to adjust to changing circumstances, but the industry as a whole continues to experience rapid growth and expansion.
Canada's tech industry has been experiencing impressive growth, with cities like Montreal, Vancouver, and Toronto seeing significant increases in both the number of people employed in tech positions and in the salaries being offered to those workers. Major players like Google, Microsoft, Salesforce, Apple, Facebook, and Shopify have been driving this growth, with significant revenue and headcount increases over the past few years.
2. Use this period to upgrade and keep your best with stable salaries
Despite these recent layoffs, top engineers are still in high demand, and companies should use this time to upgrade their talent pool and keep their best employees with stable salaries. It's important to note that top engineers are not on the market for long, and companies should act quickly to secure the best talent.
3. Stay elastic for growth (outsource options for the short term)
Staying elastic for growth is crucial for companies in the tech industry despite market conditions. Outsourcing options for the short term can be a useful strategy for scaling up quickly without committing to permanent hires. (On that note - ask us about our Fractional Executives program!)
4. The economy has strong fundamentals and VC money needs to be deployed
The strong fundamentals of the economy and the need for VC money to be deployed means that there is still significant potential for growth in the tech industry. Venture may inspire a short feeding frenzy for deals, but companies should be strategic and selective in their investments to ensure long-term success.
Overall, while the tech industry may experience occasional dips and challenges, it remains a dynamic and exciting field with significant potential for innovation and job growth. Companies that stay agile, prioritize talent retention and acquisition, and make strategic investments will be well-positioned to thrive in the years to come.
Want to dig further into the data? Read on for a summary of the presentation along with some data-rich slides.
Detailed Webinar Summary
Despite recent news about layoffs in the tech industry, the overall outlook is positive. While companies may occasionally need to downsize to adjust to changing circumstances, the industry as a whole continues to experience rapid growth and expansion. With new companies emerging and existing firms expanding rapidly, the tech industry is poised to continue driving innovation and job growth for years to come.
Canada's tech industry has been experiencing rapid growth over the past few years, with certain markets seeing particularly impressive progress. According to recent data, the fastest-growing markets in Canada's tech industry over the past five years have been Montreal, Vancouver, and Toronto. These cities have seen significant increases in both the number of people employed in tech positions and in the salaries being offered to those workers.
In Montreal, for example, the number of tech jobs grew by 44% over the past five years, while the average salary for a tech worker in the city rose by 21%. Meanwhile, Vancouver saw even more impressive growth, with a 63% increase in tech jobs and a 28% increase in salaries. And in Toronto, which already had a robust tech industry, the number of tech jobs grew by 27% and the average salary increased by 22%.
Of course, Canada is just one piece of the larger global tech landscape. The tech industry has seen growth across North America, South America, and Europe, with new companies emerging and existing firms expanding rapidly. Major players like Google, Microsoft, Salesforce, Apple, Facebook, and Shopify have been at the forefront of this expansion, experiencing significant revenue and headcount growth over the past few years.
For example, Google has seen its revenue grow by over 50% since 2019, while its headcount has increased by nearly 30%. Similarly, Microsoft has seen a 43% revenue increase and a 20% headcount increase over the same period. Salesforce has experienced even more impressive growth, with its revenue rising by over 60% and its headcount increasing by 40%.
All of this growth has led to a hiring spree at these and other major tech companies. From 2019 to 2022, these companies were actively seeking out new talent to fuel their continued expansion. And with the tech industry showing no signs of slowing down from a profitability standpoint, it's likely that this hiring trend will ramp right back up in 2023.
Rising salaries and talent budgets
The tech industry has been rapidly growing in Canada in recent years, with a total of 30,700 people being hired across 216 tech companies between 2021 and 2022. What's interesting is that 44% of these hires were net-new hires, indicating significant growth within the industry. In terms of needs, 16% of companies planned to grow in 2022, which indicates a strong demand for tech talent.
However, with the increase in demand for tech talent, there has also been a rise in the cost of hiring. The 5-year average cost of Canadian talent has increased by 12% at a national level, despite organizations implementing cost-saving measures. This trend is expected to continue, as salaries are still increasing as of November 2022.
It's worth noting that companies are aware of this trend and are taking action. According to the presentation, 37% of companies have increased their talent budgets in 2023, while 26% have kept their budget the same. This indicates that companies recognize the value of investing in talent and are willing to spend more to secure the best candidates.
Another interesting data point is the voluntary turnover rate in the tech industry, which was 15% in 2021. This rate increased slightly to 16% in 2022, indicating that some tech professionals are leaving their jobs for new opportunities. This could be due to a number of factors, such as better compensation or growth opportunities at other companies.
The tech industry has seen significant salary growth in certain job roles, particularly in the top 10 jobs with the highest year-over-year median base salary increase within the same organization and job title. The most significant salary growth was seen in entry-level UX Designer positions, which had a whopping increase of 57.7%. Sales Engineers, senior/lead UX Designers, and Web Software Developers also experienced substantial salary growth, with increases of 44.9%, 22.8%, and 21.4%, respectively. The list also included Data Scientists (entry level), intermediate UX Designers, Implementation Specialists, and Managers of Software Engineering, with salary increases ranging from 15.1% to 21.1%. These high-demand job roles are indicative of areas within the tech industry where candidates can potentially negotiate higher salaries.
This data indicates that the tech industry in Canada is rapidly expanding and shows no signs of slowing down. The need for talent is high, and companies are willing to pay for it. It's an exciting time to be in the tech industry in Canada, and we can only expect more growth and opportunities in the years to come.
Looking ahead to 2023
Looking into 2023, the tech industry seems to be in a good position. The greatest concern for companies over the last 3 years has been that a recession is imminent, and we don’t yet know how bad it will be. However, towards the end of 2022, it looks like the labour market indicators are hedgings against the prediction of a recession. Goldman Sachs actually just recently changed their prediction of a recession in 2023 from 35% chance of happening now down to 25% - and this is based largely on labour market statistics.
Unemployment rates have hit a historic low, with 3.9% overall and 2% in the tech sector, marking the lowest it has been in 53 years. Additionally, there are currently 1.9 jobs for every working adult. The service sector has also experienced a significant bounce back since the pandemic, which represents 36% of all US jobs, with 1.19 million jobs added in the last 6 months.
Moreover, the venture capital community is sitting on a record amount of "dry powder," which refers to money raised by VCs that hasn't been deployed yet. This has led to the belief that we are on the verge of a new wave of tech startups, and a large investment cycle is about to begin. In the United States alone, venture capital investors have raised $290 billion in dry powder, which is expected to ignite the tech industry's growth. The presentation argues that this influx of funding will destroy the dam of 'market correction'. In January, VC funding of $31 billion was up 27% over December, indicating that the industry is poised for significant growth in the coming years.
When you ‘zoom out’ and look at the tech industry over the past 5 years, it’s clear that we’ve been experiencing unprecedented growth, creating new opportunities for job seekers and innovative companies alike. While the demand for talent continues to increase, so do the salaries and budgets companies are willing to offer to attract the best and brightest in the field. As the industry continues to expand, it will be crucial for companies to prioritize investing in their employees and fostering a culture of innovation and collaboration. As we look ahead to the future of tech, the possibilities are endless and the potential for positive impact on society remains second to no other industry. From advancing healthcare and education to solving global challenges, the tech industry has the power to transform the world we live in, and those who work in it have the opportunity to make a meaningful difference.
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