We’ve seen the headlines about technology firms like Google, Amazon, Microsoft, Yahoo, Meta, and Zoom cutting jobs this year. At the year’s midpoint, more than 200,000 jobs were lost. Are white-collar jobs at risk?
Macroeconomic uncertainty, profitability concerns, and high-interest rates have limited the amount of venture capital flowing into the tech sector. The capital is available, with estimates of more than $200 billion in “dry powder” waiting to be invested. Over the past couple of years, many companies hired what, in hindsight, is too many people. The current situation is potentially a permanent shift in the labor force.
A recent article in the Wall Street Journal looks at this issue. For technology companies, efficiency and profitability are reshaping the way they go to market. Combined with the rise of artificial intelligence (AI) and machine learning (ML), the white-collar job market will look very different in the coming years.
For years we’ve seen manufacturing jobs lost to automation, which created more, higher-level jobs for people. With AI and ML, we now see accounting, legal, hr, and software jobs at risk.
While AI is still in its infancy, and we won’t fully understand the impact for a few years, the current business climate has the C-suite looking at where they can use the technology in the future and which jobs they may not need to replace.
Many leaders believe AI will have the same effect as robotics in manufacturing, creating more, higher-level jobs. Companies could see improved efficiency without laying off workers through reskilling and upskilling programs.
A big part of the current layoffs was the over-hiring by tech companies when money was easy to raise. Management layers swelled, and bureaucracy impeded growth and innovation. To combat this, companies are looking to flatten their corporate structures.
We heard the same promises in the past, but employment levels went back up as the economy grew. However, some C-suite leaders believe this time will be different, “During past periods when higher interest rates pitched the U.S. economy into recession, job losses were often led by industries most sensitive to rate changes, such as manufacturing and construction. “It seems like we’re not seeing that right now. It could be the structure of the economy has changed,” said Preston Mui, an economist at Employ America, who has been studying white-collar job losses, adding, “A real question is: The Fed raises rates and softens the economy, where is that going to show up?” The evidence is pointing to white-collar jobs.”
The Federal Reserve has increased the interest rate for over a year, and job openings are at their lowest level in over two years. With blue-collar workers still in demand, white-collar workers are taking the brunt of the current downturn.
Management and professional hiring have outpaced service roles over the past few decades by more than two to one. And the higher demand resulted in higher pay for those jobs. The pandemic reversed the trend, with wages rising faster for blue-collar roles. According to the article, wages in small – and medium-sized businesses fell for white-collar roles but rose for some service and blue-collar industries in Q2 of this year.
According to the Labor Department, two-thirds of the jobs that will provide the most growth over the next decade are blue-collar. It will be interesting to see how the job market shakes out over the remainder of the year and into next year. And to see the impact of AI on the workforce as the technology continues to evolve.
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