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Sidney Rothstein: The dot-com bust of the early 2000s offers insight for tech workers today

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Tech workers, facing layoffs today, have many lessons to learn from the dot-com bust of the early 2000s. 

Google is laying off 12,000 workers, becoming the latest tech company to trim staff as the economic boom that the industry rode during the COVID-19 pandemic ebbs. The Silicon Valley giant’s CEO Sundar Pichai shared the news Friday in an email to staff that was also posted on the company’s news blog. He said that the company has hired for “periods of dramatic growth” over the past two years but that was a “different economic reality than the one we face today.” He said the layoffs reflect a “rigorous review” that Google carried out of product areas and functions.

Sundar Pichai apologizes that “we hired for a different economic reality than the one we face today,” before firing 12,000 workers from Google.

Mark Zuckerberg announces that the metaverse is the future, but not for 11,000 laid-off Meta employees. Amazon owns the retail space, but says 10,000 jobs there are “no longer necessary.” Elon Musk is willing to pay $44 billion for Twitter, but says he doesn’t need much of its 7,500-person workforce.

By the end of 2022, tech firms had laid off more than 150,000 workers.

The job cuts show no sign of stopping. We’re only a few weeks into 2023, but already, tech firms have fired nearly more than 40,000 workers, on pace to far surpass last year’s layoffs.

We’ve been through this before: Hundreds of thousands of workers lost their jobs during the dot-com crash of the early 2000s. But the aura of unbounded growth has blinded us to that history, and the lessons that could help workers in the current downturn.

Lessons from the past ...

The experience of the 2000s taught us several things:

The first lesson is that tech employment is precarious. Despite the allure of high wages and storied perks like on-site laundry and free sushi, tech workers are remarkably vulnerable to job loss. In the early 2000s, they were 4.5 times more likely to face mass layoffs than workers in other sectors, and almost twice as likely during the 2008 financial crisis.

The same is true even during supposedly normal times: During the entire period from 2000 to 2020, it took unemployed people in tech an average of more than 28 weeks to find new jobs, at least a month longer than workers in other fields.

The second lesson of recent history is that such layoffs are often avoidable. Management typically claims inevitability, as IBM did in 2002 when its termination letters described negative market trends before informing workers that “you have been selected for permanent layoff.” Two decades later, in his layoff announcement at Meta, Mark Zuckerberg said “Unfortunately, this” — i.e., current economic conditions — “did not play out the way I expected.”

Economic fatalism is an excuse. That’s the third lesson. Layoffs are just one option among many.

Management has a duty to show greater imagination and basic business sense in order to avoid such reflexive and destructive cutting of people’s livelihoods.

When management fails, the responsibility falls to the workers themselves to mobilize. That’s the fourth lesson.

For instance, when Siemens’ Munich-based Information and Communication Networks (ICN) division announced 2,600 planned layoffs in 2002 in response to a market downturn, those workers banded together, analyzed the firm’s business data and identified alternate solutions.

That analysis was not enough to convince Siemens’ management. The workers mobilized, coordinating more than 300 legal objections to the planned dismissals. Their judicial victories raised the potential cost of the layoffs and eventually persuaded the company’s leaders to make different choices. By the time the dust had settled three years later, ICN workers had saved more than 95% of those 2,600 jobs scheduled for elimination.

Here in the U.S., IBM employees were similarly able to invoke anti-discrimination laws to contest layoffs during the dot-com bust, ultimately winning a settlement and forcing the company to amend its dismissal practices.

… applied to the present

Today’s situation today is different from the early 2000s.

Tech is bigger now — more established, more corporate and more willing to engage in union-busting. But the labor movement has also evolved. Tech workers are organizing in creative ways, including through the 2018 Google Walkout; Facebook’s Workers for Workers; Collective Action in Tech; the Tech Workers’ Coalition; and, at Google’s parent corporation, through the Alphabet Workers Union. Established unions, especially Communication Workers of America, have also increased their attention to workers in the tech sector.

Tech is not the only sector where we observe an upsurge of labor power.

Over the past year, workers at Starbucks have organized across the country, and the strike in the University of California system had nearly 50,000 academic workers putting down their pens and pipets to walk the picket line. Many are surprised that these workers — whether in low-paid retail jobs or prestigious research labs — are capable of organizing, but workers’ growing power has been met with open arms. Recent polls show that 71 percent of Americans approve of labor unions, the highest approval rating since 1965.

Despite labor’s momentum, only 10 percent of American workers currently belong to unions, but the layoffs in tech show why that could soon change. Even the most privileged workers are precarious, and even they need to develop their capacity for collective action.

Just like industrial and clerical workers before them, tech workers can build power through organizing and use that power to defend their jobs.

The experience of the first dot-com crash shows that they can — and that they must. That might be the most important lesson for today.

Sidney Rothstein is assistant professor of political science at Williams College and author of “Recoding Power: Tactics for Mobilizing Tech Workers.”

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