"Mega layoffs" that eliminate thousands of employees at once are emerging as a new management trend among US companies. Large-scale workforce reductions are no longer seen as signs of management failure but rather as effective tools for cutting costs and boosting share prices in the short term.
According to a recent Wall Street Journal report, Snap cut 16% of its total workforce, while Block slashed a staggering 40%. Oracle also let go of thousands, and Amazon has laid off around 30,000 employees in recent months. Such large-scale workforce reductions, which in the past would have been interpreted as serious signs of management crisis, are paradoxically receiving enthusiastic responses from investors.
Snap, whose stock had fallen 23% over the past year, saw its shares surge 8% immediately after announcing plans to cut 1,000 jobs. Block, whose stock had dropped 16% earlier this year, recovered all its losses and turned to an upward trend after cutting nearly half of its workforce, or 4,000 employees, at the end of February. Amrita Ahuja, Block's Chief Financial Officer and Chief Operating Officer, even revealed in an interview that she had received a flood of benchmarking inquiries from other company executives asking how they could replicate such large-scale layoffs.
The WSJ analyzed that this trend reflects a fundamental shift in how US companies view their white-collar workforce. Companies that once offered exceptional salaries and benefits to attract top knowledge workers are now beginning to conclude that bloated organizational size actually reduces work efficiency. Mo Koyfman, founder of venture capital firm Shine Capital, pointed out that "most companies could cut 30% to 50% of their workforce at any time with little difference in performance."
However, some analyses suggest that the current wave of layoffs is not simply because artificial intelligence (AI) has immediately replaced human jobs. Companies cite the enormous costs of building AI infrastructure, rather than the AI technology itself, as the bigger source of pressure. Particularly for IT companies, the WSJ explained, the current moves are largely a normalization of the over-hiring that took place during the pandemic. Beth Steinberg, a former human resources executive, expressed concern that once some companies receive market praise for large-scale layoffs, others will follow suit, saying "we need to do mass layoffs too."
This shift in management trends is directly translating into employment insecurity for college-educated white-collar workers. According to economist Gad Levanon's analysis of US Labor Department data, the unemployment rate for four-year college graduates under 34 has caught up with and even exceeded the unemployment rate for two-year associate degree holders (4.1%) over the past 12 months. He assessed that "the employment stability premium that a bachelor's degree used to provide has, at least for now, disappeared."
Anxiety is spreading rapidly across Silicon Valley and the broader tech industry. Michael Maximilien, a former IBM senior engineer who recently founded an AI agent management startup, said he receives daily employment inquiries from large corporate employees. He predicted that as AI coding tools such as Anthropic's Claude and OpenAI's Codex advance dramatically, a significant number of tech companies could cut 20% to 50% of their workforce by the end of this year.
On the other hand, Tariq Shaukat, CEO of Sonar, drew a line, saying AI cannot fully explain the recent wave of large-scale layoffs of around 40%. While AI does reduce work hours, he pointed out that human intervention is still essential for correcting errors and interpreting complex data. The WSJ warned that this fierce wave of layoffs, which began in the tech industry, is rapidly spreading to other industries that expanded their workforce significantly during the pandemic, such as logistics and warehousing. It also projected that if such mass layoffs continue, they are highly likely to become a key political issue ahead of the upcoming US elections.
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