Over the course of the year, one of the most interesting stories that have come out is that artificial intelligence is transforming the labor force, and layoffs are a necessary part of this process. Tech giants and traditional companies are now using the adoption of AI as a way to explain workforce layoffs, but upon closer inspection, it appears that many of these layoffs are less about the current capabilities of AI and more about corporate expectations, positioning, and hype surrounding the revolutionary power of AI.
This process has created a new wave of layoffs that are being increasingly described by economists and labor analysts as “anticipatory workforce reductions.” These layoffs are driven by the prospect of future benefits from AI rather than job cuts to replace existing human labor with machine technology. For corporate leaders facing pressure to improve efficiency and demonstrate innovation, the appeal of AI may be hard to resist even if its contribution to efficiency and innovation is small.
In the tech industry, companies have taken it a step further by actually using layoffs as a tool for redirecting their focus towards AI technologies even as the actual AI technologies they offer remain in the relatively early stages of development. This is not an isolated incident, as industry data actually points towards a significant rise in the number of layoffs related to AI technologies, with tens of thousands of jobs cited as part of the overall umbrella of AI-related repositioning over the course of the last year.
However, while layoffs related to AI technologies are often cited as a reason for overall job reductions, actual data indicates that these technologies are not causing the type of layoffs that many people expect. This is because actual hiring trends related to the overall use of AI technologies show that a relatively small percentage of job postings by major corporations include AI roles, and a significant portion of the workforce has a limited focus on using AI technologies.
Broader market discourses around innovation and competitiveness have inextricably linked AI. Layoffs driven by AI, therefore, become a strategic move by companies to signal to investors and boards that a company is committed to innovation, even if this means ignoring the actual capabilities of AI. In this context, AI-driven layoffs become a form of strategic signaling from companies.
There is a tendency for leaders to conflate AI’s potential with its actual performance in determining where labor would be required. For instance, while AI tools like generative AI do a remarkable job in certain domains, these tools are less capable in more complex domains, and the complex, messy nature of professional work means that most AI tools currently function to assist, not replace, workers.
There are also concerns that restructuring too early can actually harm companies in the long term, as there are chances that businesses that are aggressively restructuring their workforce on the back of AI benefits may end up hiring more people or investing more in training than they initially anticipated.
Looking forward, the test for organizations will be to base their approaches to AI on evidence rather than expectation, and this will involve investing in pilots where AI makes a tangible difference, designing the workflow so AI is used as a complement rather than a substitute, and clearly articulating the actual impact on the workforce so as not to conflate the hype around the potential for AI with the actual impact on the workforce.
Ultimately, the future of work will be impacted by AI, although the recent round of layoffs might say more about the psychology of corporations and the public’s fascination with the narrative around AI than the actual potential for it to replace the human workforce.
