What does the US Tech sector crisis mean for expats?

Expat news
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Published on 2023-02-01 at 10:00 by Asaël Häzaq
Following years of euphoria and a strong hiring trend in the early days of COVID, uncertainty took over the US Tech sector. Successive waves of layoffs worldwide have left thousands of employees in shock. The situation is particularly critical in the United States, with foreigners forced by their visas to find a job quickly. But what led to such a huge surge in layoffs? What is the future of the US tech sector, and how are foreign workers impacted?

Will 2023 be another dark year for Tech?

2022 marked a turning point in the world of Tech. After massive hiring during COVID, new technology giants are increasing layoff plans worldwide. Amazon laid off 18,000 employees, and Microsoft announced 10,000 job cuts. Meta, which has been losing momentum since its change of name and strategy, with the firm investing heavily in virtual reality, is also laying off 11,000 employees. In total, 130,000 jobs have been lost, including nearly 100,000 cuts in the United States alone. This is another blow to thousands of employees, adding to the global economic gloom. In the United States, 134,000 new job cuts have already been announced this year.

Should we compare 2022 to the bursting of the Internet bubble in the 2000s? Well, analysts prefer to be cautious. However, despite the sharp rise in layoffs, the Tech sector is still hiring in the US and globally. In the United States, the tech industry is even the sector with the second-lowest number of job losses over the last 20 years. However, it is clear that the euphoria of previous years is over. Players in the sector are more reluctant to hire, especially when the World Bank's forecast of a recession this year calls for caution. The United States is still hoping to escape the recession thanks to its 2.1% growth in 2022, low unemployment (3.5%), and dropping inflation rate. But some economists believe that the US economy will still slow down this year.

What positions are affected by layoffs?

Many jobs are potentially threatened, some more than others, depending on corporate strategies. Many businesses have embarked on the AI race, which represents a guarantee for sector professionals to keep their jobs. Others, who thought they were safe in sectors like communication, finance, or e-commerce, were quickly disillusioned. 

At Google, few details have transpired. But on Friday, January 20, Sundar Pichai, the CEO of Google and Alphabet, announced in an email sent to all employees and on a blog post that the company was parting with 12,000 employees worldwide. It is reported that the entire Alphabet company, all products, functions, levels and geographies will be concerned by these layoffs, without specifying the positions targeted. However, jobs relating to Artificial Intelligence (AI) and "the highest priorities of the company" will be retained. 

New Twitter boss, Elon Musk, has cut almost half of his staff. Entire teams were almost eliminated, namely in communications, marketing, human rights and diversity departments. Amazon plans, first of all, to slash its physical store employees. They will be the first, along with the employees in charge of the brand's electronic devices, to be targeted by the layoff plan. The firm has also frozen hiring in offices. On its side, Microsoft is laying off slightly fewer employees than its competitors. The job cuts mainly concern the legal department, the Xbox department, and the product experience center. Other strategic positions are also targeted.

Why is there such a wave of layoffs?

In essence, the Tech world has the reputation of being sometimes unstable and not always profitable. The reasons lie in its intricate interconnection with other market players. The current period is nevertheless unprecedented. The pandemic, especially the lockdowns, has led to new behaviors. People had been spending more time at home, remote working was trending, and most shops were closed. This situation resulted in a booming demand in various areas, especially in fields like online orders, home deliveries, gaming applications, video games, streaming, etc. Everywhere in the world, the same phenomenon was observed. People were taking the time to redecorate their homes, buying desktop computers, subscribing to various streaming platforms, doing sports and taking online cooking classes.

To meet such demand, tech companies may have been hiring too heavily, perhaps too much. That's what they admit, anyway. In fact, they believed in a lasting behavior change. But with border reopenings and the return to normalcy, behaviors also returned to pre-pandemic levels. Hence the decline in demand, which in turn undermined the turnover of the Tech giants. This is how the wave of layoffs started. 

It is also important to remember that these layoffs are happening in the context of a global crisis. 2022 was also the year of the war in Ukraine and inflation. Rather than a "tech crisis", some economists prefer to speak of a "growth breakdown". Others point to the role of significant shareholders. Faced with losses, shareholders of the Tech giants expect a quick response, implying that laying off employees is one of the fastest actionable levers. This is especially true in the United States, where the law authorizes express layoffs. These job cuts have affected thousands of H-1B visa holders.

What the layoffs in the Tech sector mean for H-1B visa holders

For expatriates, it's a double whammy. The wave of layoffs in the tech industry is affecting thousands of foreigners holding H-1B visas. The H-1B visa is the best-known gateway to the Green Card (permanent resident card). It is a work visa intended for qualified foreigners like engineers, computer experts, researchers, etc. In fact, many American companies go for this visa when recruiting foreign talent. Tech giants are no exception. 

To qualify for the H-1B visa, foreign talents must be sponsored by their employer. Therefore, the visa's validity depends, in practice, on the relationship with the employer. If visa holders lose their job, they risk losing their visas and having to leave the country. This is a tragedy for thousands of expatriates who have been laid off in the Tech sector lately. Many of them suddenly found themselves unemployed, with only a short period to find a new job. In fact, the American administration gives a 60-day delay to laid-off foreigners to find a new job or change their visa category. If they fail, they will need to leave the country.

And yet, foreign talents represent 20 to 30% of the workforce in US tech companies. These companies were often founded by immigrants who arrived on an H-1B visa and created their startups in the United States before climbing the social ladder. But while Tech is still hiring, economists believe that only some foreign talents will find a job. The context has changed. It was much easier back in 2021 to find a job in such short delays. 

In addition to rapidly finding work, laid-off expatriates have only limited alternatives for staying on American soil. They can apply for a student visa or a green card or create their own business. These are, however, very costly procedures that do not always result in a positive outcome. Some people suggest revising the 60-day limit, which is considered too short to find a job, especially in times of crisis.

Chicago, the new Tech hub

What if Chicago had the solution? The city is counting on skilled immigrants to become the new American innovation and technology Eldorado. The city is embracing its ambitions and operating in close collaboration with businesses. More than 35 Chicago companies say they want to hire H-1B visa holders. This is an opportunity to recruit international talent and get a new economic boost while more than 400,000 jobs are reportedly available in Illinois. 

In Chicago, the city and businesses are pitching in to get the message out: "Chicago needs talent." "Chicago is innovating." "Chicago is vibrant, welcoming and dynamic." "Chicago is the new tech hub." But Chicago isn't going to invest only in Tech. Recognizing that diversification is the key to a thriving economy, the city is indeed promoting its strong positioning in other sectors like industry, manufacturing, finance, health care, renewable energy and food. A balance that will better enable it to hold up in times of crisis. That's one more reason for the city to promote its economic model.

Useful links:

Go Tech Chicago

US Citizenship and Immigration and Services

H-1B visa process