How AI became the scapegoat for the current wave of mass layoffs

With a new season of mass layoffs upon us, it seems corporate America has found a new scapegoat. 

When Amazon recently disclosed that upcoming layoffs would impact 14,000 corporate jobs, the tech giant said the cuts would help make Amazon leaner. 

“This generation of AI is the most transformative technology we’ve seen since the internet, and it’s enabling companies to innovate much faster than ever before,” HR leader Beth Galetti said in a memo. (Amazon CEO Andy Jassy has since clarified that the layoffs are driven by culture, not AI or the bottom line.) 

Other tech companies like Microsoft have trimmed headcount this year to the tune of over 15,000 layoffs, all the while sinking billions of dollars into AI investments. “To deliver on our mission, we need to stay focused on our three business priorities: security, quality, and AI transformation,” Microsoft CEO Satya Nadella told employees after a significant round of layoffs in July. “We are doubling down on the fundamentals while continuing to define new frontiers in AI.”

Corporate behemoths like Target and UPS have made significant cuts to their workforce in recent months while framing AI as a key component of efforts to turn around their business. The layoffs at Target are the first major cuts to its workforce in a decade, eliminating 1,800 corporate roles; UPS, on the other hand, has slashed 48,000 jobs over the course of the year, most of which have targeted drivers and warehouse workers. Incoming Target CEO Michael Fiddelke has shared that one of his key priorities is to “more fully use technology to improve our speed, guest experience and efficiency throughout the business.” During an earnings call last month, CEO Carol Tomé noted that UPS would make fewer seasonal hires and cut back on vehicle leases, and that “much of this efficiency is powered by automation.”

The past month has seen an uptick in layoffs across the business world: Over 150,000 jobs were cut in October alone, according to a tally by the outplacement firm Challenger, Gray & Christmas—the most in October since 2003. Artificial intelligence was one of the most common explanations for layoffs, a close second to the usual excuse of reducing costs. All this has fueled concerns that AI is, in fact, coming for your job—perhaps sooner than you anticipated. 

But experts say there is little data to support this narrative, despite what the recent job cuts might suggest. 

In this Premium story, readers will learn:

– Why so many companies are blaming AI for their layoffs

– What’s really going on with the labor market—and whether your job is at stake

– How AI may actually impact the way you work

The AI ‘meltdown’

“Statements from CEOs are about the worst way to evaluate the impact of AI on the labor market,” says Martha Gimbel, executive director of the Budget Lab at Yale University.

Gimbel coauthored a recent analysis with the Brookings Institution and the Budget Lab, which found that the rise of generative AI has had little effect on the labor market so far: In the three years since ChatGPT launched to the public, the share of workers in jobs that are most vulnerable to disruption has remained more or less unchanged. 

Unemployment figures also support these findings, with little indication that AI is displacing workers—at least not yet. In fact, the analysis shows that adoption of AI has been fairly comparable to how previous new technologies, like computers and the internet, permeated the workplace.

“I think that’s surprising to the public, and it’s surprising given the tenor of the conversation,” says Brookings senior fellow Molly Kinder, who also worked on the report.  

“But it’s really not surprising when you think of how hard it is to implement this in the workplace. There’s a really big gap between how fast the technology itself is going and the messy, slower pace of workplaces figuring out how to use it beyond a pilot.”

There are, of course, legitimate fears about how AI can (and will) upend the way we work. Public opinion polling indicates that few Americans—just around 15%—believe the technology will have a positive impact in the coming years, while 64% of the general public expects to see job losses due to AI. But Gimbel posits those concerns may be overshadowing the real dynamics of the labor market and perpetuating a misleading narrative. 

“I think everyone is so freaked out about AI—and they are so itchy that if there is the phrase ‘layoffs’ and the phrase ‘AI’ within two miles of each other, everyone has a meltdown,” she says. 

“I get why this is so stressful to people. But the cart is not just before the horse. The haystack is eight miles in front of the horse.”

The (more complex, more boring) truth

So what should we make of claims that AI is catalyzing a seismic shift across the workforce? 

For starters, Big Tech is no stranger to mass layoffs. Even when the tech industry does make major cuts, however, they account for just a fraction of layoffs across the labor market, according to experts. Gimbel points out that the U.S. has about 1.7 million layoffs and discharges each month, per data from the Bureau of Labor Statistics. “There is a lot of attention that goes to layoffs in Silicon Valley for a range of reasons,” she says, “but we should not kid ourselves about how big these layoffs are in the context of the broader U.S. economy.” 

Tech companies are also prone to overhiring and then culling the ranks when the economy takes a turn, as has been the case across the industry since the pandemic. For some of those companies—including Microsoft and Amazon—layoffs are also the result of a desire to eliminate middle managers, who certainly can’t be supplanted with AI at the moment, Kinder says. 

“There’s no question in my mind that Amazon will look for labor-saving possibilities,” she explains, “but it’s not obvious to me that AI right now is good enough to replace middle management.” (Amazon told Fast Company the layoffs were a continuation of the company’s efforts to reduce bureaucracy and that the vast majority of cuts were not connected to AI.) In fact, Kinder believes companies and business leaders are doing themselves a disservice by suggesting AI is driving layoffs or that employees’ jobs might be at risk if they don’t get up to speed on the technology. “There’s a very strong business case for why you shouldn’t just scare the pants off of your employees,” she says. “The way that companies are choosing to lead on this is really anti-worker, in my view.”

Given the hype around generative AI, Kinder argues that many employers are scrambling to keep up and want to look like they’re innovating. “It makes companies look good to their shareholders, to suggest ‘we are deploying AI so well [that] we are now cutting our labor costs,’” she says. 

“CEOs are looking over their shoulder saying, ‘Oh, my gosh. How is it that my competitors have figured out how to cut a bunch of their staff? I haven’t figured out those efficiency gains yet.’” 

Meanwhile, leading tech companies are personally invested in widespread AI adoption. “These are companies who are in the business of selling these services,” Kinder adds. “It’s entirely possible that AI really is part of the story, but I think we need to have a dose of skepticism about some of the motivations they have for being so loud and proud.”

Real disruption

That’s not to say AI has had no impact, or that it is not already reshaping certain jobs. 

Klarna was among the first companies to openly talk about how embracing AI had enabled hundreds of job cuts; in May, CEO Sebastian Siemiatkowski disclosed that Klarna had reduced its headcount by 40%, in part due to AI. (It’s worth noting that Klarna had slowed hiring overall and was gearing up for an IPO—and in the months since, Siemiatkowski admitted that “in a world of AI, nothing will be as valuable as humans” and reportedly reshuffled employees to fill customer service roles.) Salesforce CEO Mark Benioff claimed the company was able to cut 4,000 customer service roles because of its AI-powered chatbots, and that Salesforce relies on AI for up to 50% of its work. Tripadvisor is laying off 20% of its staff as part of a restructuring that will lean more heavily on AI. And just last month, YouTube started offering voluntary buyouts amid a restructuring that will enable the company to devote more resources to AI innovation. 

There are also signs that entry-level jobs may be under siege amid rapid advances in AI, particularly in industries like tech and finance where there is a high rate of adoption. A recent paper from Stanford University’s Institute for Human-Centered Artificial Intelligence found that early-career workers in jobs that are most vulnerable to AI disruption—software engineering and customer service, for example—have seen a 13% decline in employment since late 2022. (Employment rates for other entry level jobs, however, remain unchanged or continue to grow.) 

It’s also difficult to quantify how AI is changing the nature of jobs, Gimbel says, even if those jobs are not being eliminated outright. AI could replace or heavily augment HR roles and other back office functions, and it’s already clear that the technology is transforming fields like software engineering.

But many economists and other experts believe it’s unlikely that AI is the driving force behind the mass layoffs that are currently underway, particularly at big tech companies—something that Jassy himself acknowledged this week. 

The real explanation is, perhaps, less interesting. 

“A real rush to ascribe everything to AI”

Target, for example, has faced consumer boycotts and backlash this year over its retreat from DEI. But its financial woes predate those issues. Many companies, including UPS, have been hit hard by tariffs. (Target and UPS did not respond to requests for comment.) 

Under the Trump administration, the business world has to contend with larger macroeconomic forces, between the tariffs and policy uncertainty. “There’s a real rush to ascribe everything to AI,” Gimbel says. “If you asked me what was the biggest headwind facing the labor market right now, I would not list AI. My number-one issue for the labor market would be immigration.” 

In the current climate, it may not be politically expedient for CEOs to call attention to the real challenges that are driving layoffs and turmoil across their workforce. AI might be a more convenient excuse for layoffs, and one that may bear out as companies figure out what to do with it.

But there is not yet enough clarity on how AI can be most effectively harnessed by businesses, despite what leaders—particularly those in Silicon Valley—might say about the technology’s potential to revolutionize work. 

“I want to be clear: It is not the case that there are no uses for the technology,” Gimbel says. “It is not the case that there are no companies who have figured out how to monetize it. It is not the case that no worker has lost their job to generative AI in the U.S.”

“I’m saying when you look at the current macro economy, there is not a sign that it’s really having any kind of major impact right now. That is partly because people are just not thinking about what it takes for companies to incorporate new technology: It takes time.”