It seems like every day another major tech company announces thousands of layoffs. The silver lining here, one might think, is that surely this will put an end to the tech talent shortage we have been hearing about for years now. Right?
Unfortunately, it is not that simple. Long-term supply-and-demand imbalance in the tech labor market has created a tangle that is difficult to unravel. Surprisingly, the solution may lie abroad.
While 10,000 layoffs at Microsoft, for example, is certainly very significant, Microsoft would have to lay off its entire team in order to approach the number of open tech jobs in the U.S. There are hundreds of thousands of open positions and 2 percent unemployment in the industry.
With all that demand, the engineers laid off by Google, Meta, Amazon, and others will no doubt find jobs very quickly, one might assume. While for some that will be the case, others will have a hard time finding an employment fit despite the legions of startups hungry for their skills.
There has been a shortage of programmers for years, particularly as traditional companies add tech roles. As a result, salaries for developers have risen sharply year after year, increasing as much as 32 percent in 2022.
Startup founders often covet prospects with experience at larger tech firms, but being able to afford someone with that experience is another issue. A Google developer entering the job market this month may easily have earned more than $300,000 per year, especially since Google’s layoffs targeted senior employees.
For a startup, that salary could be a significant chunk of their funding and it would be a huge risk to put it all toward one person, especially with the amount of turnover in the industry. That is doubly true in this environment where investment capital is difficult to come by.
Plus, not all jobs at a tech company are tech jobs. Big tech also employs marketers, writers, designers, quality assurance, and every other type of position. So, while the layoff figures are staggering, many of the individuals affected are not programmers.
Startups are usually on a very accelerated timeline and need to build a product and attract users expeditiously to position themselves for additional fundraising. But the idea of hiring even just a few developers quickly in the U.S. has been laughable for years, leaving founders in a tough position.
As a result, many have turned to overseas talent. To talk about offshoring when thousands of people in the tech industry are losing their jobs each week may seem insensitive, but that’s the shape of the problem we’re dealing with. The tech talent shortage has always been a domestic phenomenon. With Americans accounting for just four percent of the world’s total population, the vast majority of programmers are in other countries.
Unlike offshoring unskilled manufacturing labor, hiring abroad for tech jobs that are virtually impossible to fill locally has been good for the U.S. Filling a crucial role with international talent often allows a startup to grow, succeed and hire other roles locally, while otherwise, it would have failed.
Some people hear the word “offshoring” and immediately assume it has always been bad for American workers. But would you rather have a company with a hybrid approach that has developers overseas and other roles filled here at home, or watch yet another American company go out of business?
With a flood of tech talent entering the workforce, U.S. companies may find they are more able to fill long-vacant roles with American talent—and that is great news. But if they are not, hiring overseas is still a good option both for individual companies and the economy as a whole.
Could this drive down tech salaries? Yes, but that is actually something that needs to happen. Developers have cultivated an in-demand skill and deserve to be well compensated, but to continue to drive tech innovation, founders need a marketplace that supports realistic salary expectations.
As big tech releases some of the talent it has hoarded back into the labor pool, and smaller companies continue to fill gaps with overseas talent, we will start to see equilibrium in the tech labor market. Becoming a developer will still be one of the most lucrative jobs out there, and with the talent bottleneck removed, the U.S. tech sector will be poised to drive another period of economic expansion.