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Young, gifted, and out of work: Why are people of color more vulnerable to layoffs?

Companies have been making a big effort in recent years to improve inclusion and make their workforces more ethnically diverse. However, some of these gains are being reversed amid global layoffs affecting the tech sector. For example, in a recent round of layoffs at Netflix, 26.6% of those affected were people of color, which is disproportionate to their representation across the company.1

In fact, marginalized groups – as well as the Diversity and Inclusion (D&I) programs built to protect them – can be the first to go in an economic downturn.2

This disparity highlights the need for companies to adopt D&I strategies not just at the hiring stage but throughout the employee lifecycle to make sure people of color are not disproportionately affected by layoffs.

Marginalized groups and DI are first to go in a recession

In this piece, we’ll explore the reasons why people of color face more challenges at work including limited access to education and opportunity, along with longstanding prejudice and discrimination.

We’ll also look at some solutions to address disparities, including using a skills-based approach to hiring. Additionally, we discuss creating a D&I policy that goes beyond ensuring hiring targets are met by also implementing best practices to promote equity and inclusivity in the workplace.

One step forward…
Two steps back
Why are people of color more likely to get laid off?
5 ways to address the problem
How skills-based hiring creates a more equitable workplace
Sources

One step forward…

Companies have shifted their D&I targets in light of the Black Lives Matter movement and calls to fight systematic oppression in the workplace. In addition, they’re responding to growing pressure to recruit younger generations who prioritize socially conscious organizations. This might explain why, in the last decade, tech corporations have started touting their D&I initiatives and outcomes — and are entering a race to secure diverse talent.

Across the tech sector, companies have begun to set and hit competitive diversity targets and are creating D&I policies to help level the playing field for talent. And they’re seeing success: for example, tech company Cisco claimed a 120% increase in Black vice presidents, and a 50% increase in Black directors in 2021.3

Salesforce also made noticeable diversity improvements in 2021 by doubling its percentage of Black hires.4 Meanwhile, Zoom ranked the highest for diversity and inclusion across US tech companies, scoring 9.46 out of 10.

With D&I on everyone’s radar, and companies engaged in a global conversation about enacting real change, things started to look up. However, too many tech companies started making promises they couldn’t deliver.

Two steps back

A few things began to change in 2022. Companies that had invested heavily in new staff started to lose their stock market value. Investors wanted to see profits (or at least fewer losses), and many companies shed staff as a result.5

Streaming giant Netflix once stated: “Transformational change won’t happen overnight. Progress takes consistent discipline, heart, and practice.”6 However, in a departure from its commitment to change, last year’s Netflix layoffs hit marginalized people particularly hard.1

Unfortunately, it doesn’t end there: Salesforce, Google, Meta, and Amazon recently laid off a combined 150,000 employees. The kicker? Most of them were from marginalized communities and so are already underrepresented in the industry.2

Why are people of color more likely to get laid off?

Often, and especially if you’re not a person of color, it can be easy to believe the illusion of inclusion in the workplace. However, time and time again, research proves that people of color are more likely to get laid off in an economic downturn compared to their White colleagues.

Here are some reasons why this happens.

Reasons why people of color are more likely to get laid off

1. D&I budget cuts

Despite the hype surrounding diversity in the workplace, D&I initiatives are often the first to fall by the wayside during a time of economic hardship. In the tech layoffs mentioned above, D&I and HR teams saw some of the highest job and budget cuts.7

Slashing D&I budgets and programs comes at a price. Without the necessary push from HR teams and D&I initiatives, it’s more difficult to create a culture where diverse candidates are recruited and have the opportunity to thrive at work.

This then has a knock-on effect on productivity, since ethnically diverse teams outperform non-diverse ones by 36%. When the economy recovers, the companies that made big cuts to D&I will have to play catch-up.

Diversity and Inclusion (D&I) initiatives are crucial, however, they don’t always instill a sense of security. Why? Because in many cases, these are treated as checkmarks, not as a corporate ethos.
William Lam, founder of UPGRD

2. Last in, first out

Companies that follow a “last in, first out” policy will let go of employees who were hired more recently than others. Many newer hires will be people of color due to recent pushes to hit diversity targets; as a result of being the last in, the chances are they’ll also be the first out.

In the tech layoffs of 2022, Black and Latino employees represented 7.42% and 11.49%, respectively; even though they make up only 6.05% and 9.96% of the industry.8

This means that a disproportionate amount of BIPOC employees are getting laid off, and all under the guise that they weren’t with the company as long as their White counterparts.

3. Structural barriers

Structural racism refers to a system of institutionalized policies, practices, and norms that perpetuate racial inequalities. It operates within a wide range of societal structures, including education, healthcare, criminal justice, and employment, resulting in systemic disadvantages for communities based on their race or ethnicity.

In the workplace, people of color face structural barriers that have historically prevented them from getting stable, higher-paying jobs with quality benefits.9 These barriers include discriminatory hiring practices, limited access to professional networks and mentorship opportunities, wage disparities, and biased performance evaluations.

At the same time, racial discrimination in the workplace has led to fewer opportunities for internal mobility and promotion and higher rates of layoffs.

People of color also face more financial barriers to getting a university education or accessing digital or technical skills training. This means they’re more likely to be passed over in traditional hiring methods that prioritize resumes and four-year college degrees.

With limited support and representation in tech, leaders and stakeholders often don’t see the inherent biases that exist in their companies.For example, a 2023 study found that Black candidates and employees who showcase their abilities and skills in interviews or share their achievements on internal Slack channels are penalized for it.

This means that the usual advice to candidates to promote themselves in order to get ahead doesn’t work for people of color. Instead, a structural change in the way companies recruit and promote candidates is necessary. This could include using blind resumes so recruiters can’t discriminate against candidates based on their names. Companies can also take a skills-based approach to choosing internal candidates for promotion, rather than relying on the subjective opinions of team leads.

4. Discrimination and bias

People of color face clear examples of racism in the firing and hiring process, which leaves them more vulnerable to layoffs during times of economic crisis.

In a landmark hiring bias study conducted by a team of economists at the University of Chicago and the University of California, Berkeley, 80,000 fake job applications for entry-level positions were sent to 100 different companies with a combination of White and African-American-sounding names. The results show that candidates with African-American-sounding names, for example, Aliyah or DeAndre, were 2.1% less likely to be contacted by the employer.

Not only are BIPOC workers less likely to get hired, regardless of industry or sector, they’re also less likely to be promoted to high-ranking positions in the company. This makes it easier to fire workers when they’re considered lower-skilled or non-essential personnel.

Psychologist and leadership coach Gena Cox has faced countless instances of racial discrimination throughout her career. She says:

The one that always sticks with me is when I was told I didn’t get a promotion because it wasn’t “my turn,” never mind, I was not just qualified; I was overqualified. The person who got the job had more experience in the particular group but less experience than me overall. He was also a slacker with a reputation for doing as little work as possible. That situation felt like an insulting slap in the face.
Gena Cox, founder of Feels Human, LLC

Discrimination and bias is also an intersectional issue. When people possess multiple social identities (race, gender, sexuality, disability, and class), they intersect and interact with one another, resulting in unique experiences and forms of discrimination. During a period of layoffs, individuals with intersecting identities, such as LGBTQ+ women of color, face additional discrimination and exclusion.

5 ways to address the problem

It takes more than a compelling D&I statement on your website or job advertisement to address the problem of racism and workplace discrimination. Creating a truly people-centric organization starts with investing in leadership and sticking to D&I best practices, even (and especially) when the going gets tough.

Here’s how.

1. Use skills-based hiring

Skills-based hiring is a recruiting method that tests applicants on their skills and competencies before they start interviewing. By using skills-based assessments, you can determine if the candidate has the right skills for the position, instead of basing their success on their degree or education.

This helps level the playing field for candidates with different educational backgrounds, like workers who are skilled through alternative routes (STARs) but have all the right skills. It also helps remove unconscious bias from the hiring process because you’re not relying on resumes or personal information to determine your level of interest in the candidate. In fact, 91% of companies using skills-based hiring methods see an increase in diversity.

With a skills-based approach that continues throughout the employee lifecycle, you can keep testing your staff to determine important skills gaps and base any future layoffs solely on merit. This also helps remove racial bias from the firing process: the employee either has the required skill set, or they don’t.

Skills-based tests help you determine soft, hard, and transferable skills. For example, you can use:

The Culture-add test to see if a candidate adds to company culture
The Leadership and people management test to determine if the candidate can successfully manage a team
The HTML5 test to see if the candidate can use HTML5 to effectively develop websites and web apps

2. Build a diverse HR team

To protect your people and their interests, it’s crucial to have an HR team that reflects the diverse employees they’re serving. When employees see diversity within their HR team, they are more likely to feel represented, heard, and understood. This fosters a sense of trust in the HR department and the organization as a whole.

Diverse HR teams are also better equipped to develop inclusive policies and practices that cater to the needs of a diverse workforce. Unconscious biases can affect layoff decisions, but a diverse HR team can help mitigate this bias by bringing different perspectives to the decision-making process.

Here’s how to build a diverse HR team:

Train your hiring managers and HR team on D&I measures and unconscious bias and make sure any personal candidate information is removed from job applications.
Use skills-based assessments instead of resumes to filter out those who aren’t suitable for the role.
Spend more time interviewing candidates who have the right skills and experience to get the job done. When you know a candidate has the skills, you can spend more time focusing on assessing the applicant’s passion for the company’s mission and figuring out if you’re the right fit for each other.
Include diverse team members on the interview panel and help mitigate biases and ensure a fair evaluation of candidates.

Pro tip: Use our HR manager test to determine if the candidate has the right skills and to properly take care of your people. Then, combine it with the Enneagram test to understand employee personality type, including the core beliefs and worldview each type operates from. This will help you recruit from a range of candidate pools while getting the right skills to help drive positive employee outcomes.

3. Create a meaningful D&I policy

Your D&I policy isn’t there to just state your diversity goals and targets and then be forgotten. Instead, your D&I policy should start at home and consistently remind your leaders and teams to be advocates for diversity and inclusion in everything they do. For example, when making decisions about which team members to lay off, leaders should consider whether individuals from underrepresented groups are more likely to be affected – and take action to mitigate this.

Some best practices include:

Defining the scope of your D&I policy and measuring progress in each area to ensure D&I initiatives are being reflected in policies that foster an inclusive and respectful work environment.
Committing to sourcing diverse candidates, eliminating bias from the selection process, and promoting equitable access to job opportunities.
Ensuring employees feel safe and empowered to report incidents of discrimination without fear of retaliation.
Recognizing and supporting employee affinity groups that bring together employees with shared identities or experiences.
Providing diversity and inclusion training to employees at all levels.

Companies should focus less on “DE&I” and more on making sure all their managers are what I call “Designated Hitter Leaders” who advocate for 100% of their employees and who take the time to be curious and connected so they can develop comfort with everyone they manage.
Gena Cox, founder of Feels Human, LLC

Essentially, Gena argues that leadership training and development shouldn’t be part of a D&I budget, but that it should be part of an ongoing manager development budget to ensure your leaders are nondiscriminatory and make nondiscriminatory layoff decisions. This is especially important because “manager behavior accounts for about 70% of employee experience on a team. Weak managers are not inclusive and should be trained to be so.”

4. Collect data on recruitment, promotions, and layoffs

It’s important to measure and assess the effectiveness of your organization’s D&I efforts to identify any ongoing disparities or biases. This includes:

Reviewing demographic data for significant differences in the representation of different groups across hiring, promotions, and layoffs — and whether any bias or systemic barriers may be impacting these outcomes.
Conducting employee surveys and engaging in conversations with employees to understand their experiences and perceptions.
Benchmarking your organization’s data against industry standards or external diversity metrics to gain broader insights and opportunities to learn from best practices.
Translating the data into actionable steps. If disparities or biases are identified, develop strategies and initiatives to address them. This might involve targeted recruitment efforts, mentorship or sponsorship programs, and unconscious bias training.

Stop making assumptions. Ask the people who are impacted by a potential change you want to make. For example, if you want something to be more inclusive or if you want to create a sense of belonging. Ask them. Go to the marginalized groups, do the listening sessions, do the round tables.
Heather Younger, workplace culture author and speaker

5. Abandon the last in, first out policy

A last in, first out policy prioritizes employees who have a longer period of service. However, this has a disproportionate impact on people of color who face barriers that limit their access to higher-level positions and job security. Therefore, relying solely on seniority for deciding who gets laid off can perpetuate inequality.

Instead, organizations should adopt alternative and fairer criteria for layoffs – for example, by using transparent and objective evaluation criteria to decide who should stay and who should go. This way, organizations can mitigate unconscious bias and come to a fairer and more equitable decision.

By adopting alternatives to a last in, first out policy, you can not only achieve fairer outcomes during a period of layoffs but also develop a more inclusive and supportive work environment for all employees.

How skills-based hiring creates a more equitable workplace

A strong workplace culture and a reputation for championing diversity are hard to recover once they’ve been sidelined. However, as we’ve seen, companies have failed underrepresented groups – particularly people of color – during recent waves of layoffs in the tech sector.

This means most businesses (but especially those in tech) will have a lot more work to do to create a diverse workforce and inclusive culture in an economic upturn. Additionally, the companies that preserve and protect their D&I initiatives will surely flourish in employee morale and productivity during an upswing.

In this piece, we talked about why people of color are more vulnerable in the workplace, as well as how to address the problem. We discussed best practices like building a diverse HR team, creating a meaningful D&I policy, and collecting data on recruitment, promotions, and layoffs.

By taking a skills-based approach to your HR decision-making, you can make sure diverse employees are represented throughout the entire employee lifecycle. This lets you retain diverse and skilled employees – while giving them all equal footing at work.

Want to hire diverse employees? Skills-based hiring lets you access diverse pools of candidates — with all the right skills. Download the State of Skills-based Hiring 2022 report to learn more.