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Dot-Com Workers Down, But Not Out

By Dan Gebler
Oct 31, 2000 12:00 AM PT

As the dot-com shakeout lumbers along into the holiday season, scores of businesses and potential stock option fortunes are not the only assets being left by the wayside. For six consecutive months, employees have been laid off at an alarming rate by dot-com companies either desperate for profit or closing shop altogether. While the news is indeed jarring -- few events can disrupt a household as dramatically as the loss of a job -- looking at the trends affecting those who have been laid off may offer some reassurance. There is evidence to suggest that skills developed by workers in the dot-com arena leave them well-prepared when seeking new employment.

Dot-Com Workers Down, But Not Out

Mounting Layoffs

Last week, outplacement firm Challenger, Gray and Christmas, Inc. reported that layoffs among dot-com companies for the month of October had reached a record 5,677 -- an 18 percent increase from September -- bringing the tally of job cuts for the year 2000 to 22,267.

Many of the lost dot-com jobs are byproducts of firms that have failed. However, a great deal of this year's layoffs are due to companies that are downsizing in a relentless pursuit of cost-cutting and profit-seeking.

The numbers are alarming not only because they represent an unprecedented amount of layoffs in the "New Economy," but also because there have been no signs that this trend will be reversed in the months to come.

In fact, the upcoming holiday season -- the time when dot-coms will strive to prove their viability and profitability -- may also ring the death-knell for many pure-play dot-coms and trigger the termination of employment for thousands more.

Experience As Asset

Victims of layoffs, however, do have something to offer from their dot-com days: valuable experience.

So says John Challenger, chief executive officer of the outplacement firm which published the recent report.

"Employees are finding that their experience in fact has been extremely valuable, and they are seen that way in the marketplace," Challenger told the E-Commerce Times. "They didn't win the lottery in terms of earnings and stock options in the dot-com world, but they hit the jackpot in terms of experience."

Evolution, Not Revolution

With the dose of humility that the dot-com shakeout has left in its wake, industry observers now know for certain that the Net economy lacks the strength to level the old economy to the ground. Rather, the old "bricks" economy is building an e-commerce structure of its own.

Traditional companies will keep buying dot-com companies, spending billions of dollars over the next 5 to 10 years in building e-commerce structures, and, according to Challenger, creating jobs.

"These people that have lost their jobs will still be the leaders of the e-commerce revolution -- or rather, 'evolution,'" Challenger said. "It won't destroy everything that went before it, but it will integrate with older models."

Jobless Rates Unaffected

While the numbers of layoffs continue to climb, their impact on the economy as a whole is still unclear. Unemployment rates across Silicon Valley remain near record lows at 1.7 percent in Santa Clara County, 1.5 percent in San Mateo County, and 2.6 in Contra Costa County. Joblessness rates remained exceptionally low even in the region's most urbanized areas, including 2.8 percent in San Francisco County and 2.9 in Oakland's Alameda County.

"Layoff figures don't tell you about growth in other areas," Ruth Kavenaugh, labor market analyst for California's Santa Clara County, told the E-Commerce Times. "Employers are complaining about the lack of workers and they aren't as choosy as they used to be."

Silicon Valley remains one of the markets most in need of workers, Kavenaugh added, and computer processing and high-tech industries are continuing to grow at impressive rates.

Where Now?

In the meantime, not all of the laid-off workers are eager to look for replacement dot-com positions.

"Many will go to other professions and help companies build their Web sites, market their sites and use their technology," Challenger said. "Now employees have real know-how, not just theory, and they will take what they've learned and use it to build e-commerce structures wherever they go. Their experience is in no way anything but a positive."

One significant change that workers in transition will not find surprising is that the talk of becoming a "dot-com millionaire" has died down considerably.

Challenger said he is finding that employers across the board are offering former dot-com workers comparable salaries, but not the million-dollar stock options of the dot-com world's earlier days.

Unemployment Ironies

Ironically, the low rate of unemployment in the U.S. labor market (around 3.9 percent) may actually help dot-coms achieve better performance during the holidays, according to the Challenger Gray report.

"Traditional retailers may soon be in a panic to find people," the report said. "Customer service will suffer and shoppers may turn to the Internet."

A strong holiday showing by dot-coms in need of satisfied and loyal customers may be the best chance to stem the tide of layoffs.


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