Tech layoffs: end of the cycle or new opportunities in Argentina?

Over the last decade the technology sector has experienced exponential growth in Argentina and Latin America, driven by digitalization and the increase in e-commerce, especially since 2020 with the Covid-19 pandemic. This trend generated a huge demand for tech talent, leading to an increase in salaries and the creation of new job opportunities.

However, in recent months, there has been a change of trend in the sector. Several technology companies have announced staff layoffs, generating uncertainty and concern in the labour market. In a report by the Reuters agency, Nearly 32,000 workers have been laid off from 122 tech companies since the beginning of the year.

Companies continue to cut jobs acquired during the pandemic and seek artificial intelligence specialists, which, according to a report by the International Monetary Fund, 40% of the world’s jobs will be affected in one way or another by the emergence of this tool.

“While it is true that the technology sector has experienced significant growth in recent years, it is also important to recognize that the industry is cyclical and subject to change. Recent job cuts at some tech companies should not be viewed as a general indicator of the state of the labor market. Indeed, demand for tech talent remains strong in key areas such as artificial intelligence, software development and cybersecurity. At Le Wagon, we continue to see a high employability rate for our graduates, reflecting the persistent need for qualified professionals in the sector.” Sun of the DayTalent & Partnership Officer at Le Wagon.

Technology sector: what happened after the boom?

The tech boom was not sustainable in the long term. Several factors have contributed to the slowdown in growth and layoffs:

1.1 Economic uncertainty: The global context, marked by inflation, the war in Ukraine and rising interest rates, has generated uncertainty in the market. Tech companies, sensitive to these changes, have adjusted their strategies and investment plans, which has impacted staff recruitment.

1.2 Standardization of the use of technology: Following the digital acceleration of the pandemic, some businesses have seen a normalisation in technology adoption. This has meant that the need to hire additional staff to keep pace with growth has been reduced.

1.3 Restructurings and mergers: Some tech companies have carried out internal restructuring or merged with others, resulting in the elimination of redundant jobs or the optimisation of structures.

Despite the layoffs, how does the high demand for these profiles continue?

The global technology sector continues to create more jobs than it eliminates. Yet these shifts are becoming increasingly inevitable as artificial intelligence changes the logic of business, consumers change their habits, and macroeconomic and political crises alter the state of markets.

Despite the layoffs, the demand for tech talent remains high in Argentina and Latin America. This is due to several factors:

Shortage of qualified profiles: Despite the growth of educational offerings in the tech sector, there is still a gap between the demand from companies and the number of professionals with the necessary skills.

• Soft skills: Companies are looking for professionals with soft skills such as communication, teamwork and problem-solving abilities, in addition to specific technical skills.

• Need for constant updating: The tech sector is characterized by its dynamism and the constant need to innovate. Companies are looking for profiles with up-to-date skills and adaptability to change.

Growth of new niches: New market niches are emerging within the sector, such as artificial intelligence, cybersecurity and blockchain, which require specialized profiles.

Dynamism, high demand and rapid relocation of talent

Despite these losses, the overall picture shows a strong shortage of qualified talent and a rapid relocation of laid-off workers because they are often in high demand. According to a study by Challenger, Gray & Christmas, 70% of tech workers laid off in 2023 found a new job in less than three months.

It is also estimated that by 2025 there will be a shortage of 85 million skilled workers in the ICT sector worldwide. This means that while some companies are laying off workers, many others are still actively seeking to hire employees with the right skills.

According to data from Le Wagon, 85% of companies that have hired talent from their program do so again. This reflects the high level of satisfaction among companies with the quality of training that students receive, giving them more opportunities and skills for this highly dynamic sector.

So, although there are waves of layoffs in the sector, it is also true that the creation of between 5,000 and 8,000 jobs is projected to be filled, being one of the most fluctuating sectors.