The year 2025 has witnessed a continuation of the tech layoff trend that gripped the industry in the preceding years. Headlines frequently announce workforce reductions at major technology firms, and increasingly, the spectre of artificial intelligence (AI) is cited as a contributing factor. Companies such as SAP, Google, and UPS have made announcements that either directly link layoffs to AI adoption or acknowledge AI’s role in their restructuring efforts.
This raises a crucial question: Is AI genuinely reshaping the labour market, or is it sometimes a convenient scapegoat for deeper economic and strategic Understanding the intricate relationship between AI and workforce reductions requires a deeper examination of the announcements, the context, and the perspectives of industry experts.
How many jobs are we really losing to AI?
AI is being integrated into workflows and alongside there are rising reports of job cuts. United Parcel Service Inc. (UPS) CEO Carol Tomé said that machine learning has enabled salespeople to craft proposals without consulting pricing experts. This tells us how AI is being used to reduce dependence on several tasks that have been thought to need human expertise and experience.
In May 2023, IBM made headlines when its CEO Arvind Krishna announced a pause in hiring for roles that AI could potentially replace. This decision highlighted IBM’s strategic pivot towards integrating AI into its operations. Later the company clarified there was no formal hiring freeze and that overall headcount would remain stable. But the move signalled a significant shift in workforce planning.
Industry observers noted that IBM’s transparency attracted public scrutiny, potentially influencing other companies to implement similar strategies more discreetly. Johnny Taylor, CEO of the Society for Human Resource Management says, “IBM was a leader and was public about it, and got beaten up pretty bad… So the rest of them have said ‘We’re not going to announce it, I’m just going to do it.’ We’re going to reduce our headcount”
In early 2024, BlackRock Inc. announced layoffs affecting approximately 600 employees. In a memo to staff, CEO Larry Fink and President Rob Kapito cited ‘dramatic industry shifts’ and the profound impact of new technologies as factors influencing their decision. While AI was not explicitly mentioned, the emphasis on technological transformation suggests an underlying acknowledgment of AI’s growing role in reshaping industry dynamics.
Outplacement firm Challenger, Gray & Christmas Inc. reported that since May 2023, U.S. companies have announced over 4,600 job cuts attributed to AI. However, Senior Vice President Andrew Challenger believes this figure significantly underestimates the actual number. This suggests that many other companies are opting for quieter reductions in headcount without explicitly linking them to AI and it obscures the picture of AI-related layoffs.
AI’s Role in Workforce Transformation
Duolingo Inc. decided not to renew contracts for about 10% of its contractors at the end of 2023. A spokesperson acknowledged that “Part of that could be attributed to AI” because the company no longer needed as many people for certain content generation tasks. Despite this admission, Duolingo noted that it wasn’t a ‘straight replacement’ of human workers as their full-time employees and contractors still utilize AI in their work.
Thus, AI can automate certain aspects of content generation, reducing the need for the same volume of human input in those specific areas. However, this doesn’t necessarily mean the complete elimination of content creators; instead, their roles might evolve to focus on more complex, creative, or strategic tasks that AI cannot yet handle effectively.
The Debate on Prematurity
The long-term impact of AI on jobs remains widely debated. Elon Musk famously suggested that “There will come a point where no job is needed”. This represents an extreme view of AI’s potential to automate virtually all human tasks. But several other companies emphasize augmentation, where AI tools are used to enhance human capabilities and make employees more effective and efficient, rather than outright replacing them. However, Andrew Challenger points out that an AI-augmented employee can do the work of four to five people now, suggesting that even augmentation-focused strategies may include workforce reductions.
A critical question is whether companies are laying off workers prematurely without fully grasping AI’s current limitations. Cory Stahle from Indeed Hiring Lab notes that AI tools are “not yet sophisticated enough to replace workers entirely” and still require significant human oversight.
This raises ethical concerns about using AI as a justification for job cuts when the technology may not yet warrant such drastic workforce changes. If AI is not yet capable of fully autonomous work in many domains, then significant layoffs attributed solely to its implementation might lead to operational inefficiencies and a loss of valuable human expertise.
AI as a scapegoat
While the rise of AI is a significant factor to consider, it is crucial to recognize that layoffs in the tech sector, and across industries, often stem from a confluence of economic and strategic factors that may have little or nothing to do with AI. The sources point to several such contributing factors. The post-pandemic economic landscape has necessitated workforce adjustments for many companies that saw rapid growth during periods of heightened online activity. As consumer behaviour normalizes and demand shifts, companies are re-evaluating their staffing needs.
High interest rates also play a role, particularly impacting tech companies that are often sensitive to borrowing costs and investment climates. As Columbia University Business School professor Tania Babina noted, “Tech companies are always very sensitive to high interest rates and layoff people during high interest rate environment”. Cost-cutting measures and broader economic downturns are perennial drivers of layoffs, compelling companies to optimize their operations and reduce expenses, irrespective of technological advancements.
The AI Layoff Dilemma
AI is changing the workplace, but not always in the way companies claim. While some jobs are truly affected by automation, many layoffs stem from economic shifts and cost-cutting decisions disguised as AI-driven change. For companies, responsible AI adoption means more than just efficiency gains. Organisations that focus on reskilling and retraining initiatives will help employees adapt to the changing demands of the AI-powered workplace. Ultimately, transparency and ethical considerations will be key to ensuring AI-driven workforce changes are managed responsibly.
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