Some of the biggest American corporations have started to curtail or reduce their workforces, citing artificial intelligence’s potential to increase efficiency as justification.
However, there is still conflicting evidence that the anticipated cost reductions from AI are indeed worth the investments businesses are making in it.
Because of this, some experts wonder if AI is being used as a cover for businesses that are firing workers for more traditional reasons, such poor financial performance or unpredictability in the world economy.
“We’re laying people off because we’re not that profitable or bloated, or facing a slowing economic environment,” is far more difficult for a business than saying, “We’re laying people off because we’re realizing AI-related efficiencies.” Economics professor David Autor of the Massachusetts Institute of Technology stated.
Autor, an expert on AI’s effects on workers, said that it would be prudent to assign credit or blame to AI regardless of whether it was the cause.
Amazon said this week that it has started a reorganization that will eliminate 14,000 jobs, citing artificial intelligence as a major contributing factor.
Amazon Senior Vice President Beth Galetti commented on Tuesday, “The world is changing quickly.” “The most revolutionary technology we’ve seen since the Internet is this generation of AI, and it’s enabling businesses to innovate much faster than ever before.”
However, another Amazon spokesperson attempted to minimize the impact of AI on the layoff choices a few hours later.
The woman, who asked to remain anonymous since she was not allowed to reveal her identity, stated that AI is not the source of the great majority of decreases.
We set out to enhance our teams and culture last year by, among other things, cutting layers, she added. This work continues with the reductions we’re releasing today.
Regarding the obvious discrepancy between this second AI statement and Amazon’s previous remarks, the official declined to comment.
However, that discrepancy—coming from a business as big and well-run as Amazon—highlights how challenging it may be for the general public to confirm what businesses claim about AI and its influence on hiring choices.
AI’s elusive returns
Like many other businesses, Amazon has used AI as an excuse for recent layoffs.
Due in large part to AI, Walmart has said that it plans to maintain a flat workforce over the coming years.
This month, Goldman Sachs announced a new round of layoffs, stating that it intended to decrease human positions that AI might be able to fulfill.
Citing “the benefits and efficiencies” of AI, Salesforce recently cut 4,000 employees.
One could assume that these businesses were all benefiting greatly from AI, the type of profits that would justify these challenging and costly layoffs.
According to statistics from AI research firm AlphaSense, the number of businesses that claim to be concentrating on AI’s return on investment has increased in recent months.
So where are all these advantages? That is the difficult part.
The productivity of AI, at least in its current form, is severely limited, according to recent research.
In a September research, Boston Consulting Group polled 1,250 companies, and 60% of them reported “minimal revenue and cost gains despite substantial investment” in AI.
In a comparable Deloitte poll, just 10% of the firms reported receiving a “significant return on investment from agentic AI,” or systems that are capable of making decisions more than merely responding to commands.
However, according to a recent research by GBK Collective and UPenn’s Wharton School, larger American businesses than ever are utilizing, investing in, and assessing the commercial effect of generative AI.
However, the Wharton report’s findings are inconsistent with those of the other polls. If you can save 20 minutes on an email or 30 minutes on reading a report, that’s fantastic. However, that won’t advance anything,” stated Stefano Puntoni, a research author and academic co-director of Human-AI Research at Wharton.
Performance problems?
Many of the same businesses that are announcing layoffs while boasting about their investments in AI are also facing greater financial strain.
Prior to the release of its third quarter financial reports on Thursday, Amazon announced layoffs.
Although experts anticipate progress, there is rising concern about AI posing a greater threat to Amazon’s AWS cloud infrastructure. Amazon’s stock has remained essentially flat this year and is about 6% below its January all-time high.
Salesforce shares, however, have dropped almost 29% from their peak in December 2024. Some analysts have questioned if adding more AI will be sufficient to prevent AI from endangering Salesforce’s main product offering.
“The narrative is negative and nearly impossible to refute, regardless of the company’s current state,” writes Jackson Ader, an analyst with KeyBanc Capital Financial Group.
Some businesses, especially those at the center of the AI boom, are just trying to cut back on expenditures.
Facebook parent company Meta said this week that it was eliminating 600 positions from its AI division because to worries that it had grown “bloated.”
Rival Microsoft has announced three distinct rounds of layoffs this year, and the corporation claims it is attempting to cut expenses elsewhere to pay for its big AI expenditures.
However, businesses outside of Silicon Valley are also being affected.
UPS said on Tuesday that it has removed 34,000 positions from its operations division, which includes package handlers and drivers. This is a 70% increase over its initial goal. Additionally, UPS intends to drastically reduce its dependency on seasonal employment and vehicle leases.
The corporation stated that these modifications are “powered by automation,” which is corporate jargon for AI.
According to a spokeswoman, UPS is “freeing up our network to grow in the best parts of the market.” “Robotics and AI reduce repetitive tasks and help make jobs safer.”
