Why layoffs hit workers of colour so hard

It’s already hard to face underrepresentation in the workforce. A swath of global layoffs is making it harder for people of colour – and threatening their advancement.

Underrepresentation, fewer pathways to success and a lack of institutional support: these are some of the setbacks people of colour have experienced, and continue to experience, in nearly all industries. It’s only within the past few years that many workplaces, including large tech firms, have opened up about the lack of diversity in their workforces, following decades of non-diverse hiring practices. 

Most recently, companies have invested billions in diversity and inclusion initiatives to improve these long-standing inequities and increase representation of marginalised workers. Data shows the most significant of these investments, particularly in tech, came in the wake of 2020’s Black Lives Matter movement. In many cases, these initiatives showed promising results; for example, before Elon Musk’s takeover of Twitter in late 2022, the company received positive press for hiring more black employees: in US locations, the numbers went from 6.9% to 9.4%. The same year, the US-based telecommunications conglomerate Cisco documented a 120% increase in black vice presidents, beating diversity targets they’d originally set for 2023.

However, these diversity efforts – along with workplace representation for people of colour overall – may be stalling out amid global layoffs.

An analysis of publicly available data for 2022 conducted by workforce-intelligence firm Revelio Labs shows that black and Latino workers represented 7.42% and 11.49% respectively of the tech layoffs in 2022, even though they make up only 6.05% and 9.96% of the industry, respectively. In May 2022, Netflix laid off 150 workers, 26.6% of whom were identified by Protocol as workers from underrepresented backgrounds.

While these numbers are useful for tracking the impact of layoffs on diversity in some companies, there is not enough publically available data to confirm employees of colour have been laid off in higher numbers than their white counterparts, overall. However, hiring patterns and layoff policies, as well as data on diminishing budgets for diversity, equity and inclusion (DEI) resources, show many marginalised workers are struggling in the wake of corporate cuts.

Last in, first out

Several companies have adopted layoff policies that use position and tenure as deciding factors for cost-cutting. Many of these policies were adopted in the wake of a series of high-profile lawsuits around gender and racial discrimination filed against companies including Google, Uber and Riot Games in 2018.

The stated goal of these layoff policies is neutrality, but targeting employees with less tenure and seniority makes workers of colour statistically more likely to be let go, particularly in companies who homed in on diversity-focused hiring only in recent years. In a ‘last in, first out’ layoff policy, these jobs are more likely to be cut.

According to a 2016 study by Alexandra Kalev, an associate professor of sociology and anthropology at Tel Aviv University, this layoffs approach negatively impacts underrepresented workers. And while some data has shown that workers of colour have made strides towards representation in the C-suite, many of them are recent hires, and therefore are vulnerable targets of tenure-based layoffs.

“Companies are still making those decisions, and reflexively saying [the] last people in should be the first people out,” notes Corey Jones, co-founder and chief creative officer at PrismWork, a consultancy focused on cultural transformation in the workplace.

Jones recently co-authored a Harvard Business Review article with his PrismWork colleagues Daina Middleton and Rebecca Weaver, in which they made the case that savvy companies should “embed DEI efforts into every state of the employee lifecycle­ – including separations”. If a company is genuinely committed to inclusion, argue the authors, layoffs should not disproportionately affect marginalized employees, intentionally or not.

For workers of colour, the challenges presented by layoffs are twofold. Having overcome an inital higher barrier for entry than their white counterparts, finding a new position after a layoff – particularly in a STEM careers – can prove difficult. And when workers of color are let go and unable to secure new jobs in their chosen fields, it damages a burgeoning network of professionals who provide mentorship and connections to these job seekers.

A 2023 study on the State of Inequity in the workforce from US-based diversity-advancement organisation Hue found that one in two workers of colour reported that they do not have the professional connections to get the job they want. For workers of colour, “it will take longer to recover as the economy starts to stabilize”, says Fahad Khawaja, Hue’s founder and CEO. ”As jobs start to become available again, you are now coming from a position of disadvantage, which will only make it harder to come back up at level footing with others.”  

All of these factors can compound to create a great deal of layoff anxiety for workers of colour, who feel particularly vulnerable in a downsizing labour market. “Nearly 30% [of black, indigenous, people of colour] are concerned that they will be laid off or fired in the next 12 months,” says Khawaja. “And it goes higher as you look at additional intersections. For Latinos or Latinas it's 35%, similarly, for Asians, it’s 35%. But if you look at LGBTQ+ people of colour, it’s nearly 40%.”

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‘Occupational segregation’

Another major issue for workers of colour facing layoffs is the dismantling of diversity, equity and inclusion initiatives. For example, Lyft, which cut 13% of its workforce in Q4 2022, also eliminated its diversity and inclusion teams. An analysis by Revelio Labs revealed that companies cut DEI positions “at a faster pace than non-DEI roles, beginning in 2021 and continuing to accelerate during layoffs in 2022” .

Middelton, chief strategy officer at PrismWork, notes that companies have stepped away from the diversity commitments made in 2020. “There was a real focus on DE&I initially, then all of a sudden post layoffs its ‘we’re past that, no more DE&I, not important anymore, not a priority’,” says Middleton.

In many cases, experts say these programmes are being reduced because companies commonly cut positions that aren’t considered ‘revenue-generating’. An analysis by jobs site ZipRecruiter showed recruiters, HR, marketing and sales professionals were disproportionately affected by workforce reductions. Often referred to as ‘occupational segregation’, these roles are often staffed by underrepresented workers, says Ruchika Tulshyan, the author of Inclusion on Purpose. And emerging data shows that the diversity officers who remain employed are mostly white.

These factors can result in negative morale among remaining employees. “It harms a sense of belonging, might cause your remaining staff to wonder if they are aligned with the company's values and might also appear to be arbitrary and not fair,” says Tanya Tarr, behavioural scientist and president of Cultivated Insights, an executive learning and development company.

And amid the budget cuts, Middleton worries about the long-term viability of diversity and inclusion efforts. “If DE&I experts have been disinvited to the table or disempowered, no-one owns the roll up of [those programs], and execution is often left to individuals’ managers,” she says.

‘A real storm’

Although the current layoffs situation is particularly problematic for workers of colour, experts say there are larger implications that affect everyone.

“The research is very clear: increased diversity in staff leads to increased innovation, resiliency and profitability,” says Tarr. Indeed, companies in the top 25% for racial and gender diversity are more likely to have stronger financial returns, according to a 2020 report by McKinsey & Company. And in a study on group performance, UK-based work-intelligence firm Cloverpop found that diverse teams outperform individuals about 87% of the time in business decision-making. Considering employee retention, research shows that employees in diverse and inclusive companies are 5.4 times as likely to stay for a longer tenure.

“Companies might think cutting DEI staff or initiatives helps the short-term bottom line, they're actually cutting themselves off from the human assets that would be a stabilizing revenue source,” says Tarr.  

As research continues to corroborate the positive impacts of diverse workforces on organizational success, some executives have expressed concerns over going back to homogenous workforces that exhibit a lack of trust and innovation.

As mass layoffs continue, many workers of colour may continue to see their progress impeded – especially as mass cuts aren’t showing signs of slowing. ”In many ways,” says Tulshyan, “it feels like a real storm is approaching.”