Data released earlier this month from New York, a state that requires companies to reveal their reasons for layoffs, raised eyebrows. Contrary to widespread media reports about AI-related job cuts, not a single layoff in one of the world’s largest employment hubs was attributed to AI.
New York hosts many G2000 companies and is a white-collar hub, both suggesting high potential for AI-driven layoffs. Yet, out of over 750 notices from 162 employers affecting nearly 28,300 workers, AI apparently hasn’t played a role. As Sinatra said “if you can make it (AI layoffs) here, you can make it anywhere”. So why aren’t they?
With news feeds packed with AI-fuelled layoff announcements, the data doesn’t make sense. Indeed, this week’s biggest news is Block, a payments company, announcing layoffs affecting 40% of its workforce due to AI.
There are two possible scenarios. First, companies may be reluctant to admit that AI is behind job cuts. Yet, this seems unlikely since investors are generally unfazed by layoffs, and those associated with AI often lead to significant rewards. Jack Dorsey’s announcement about Block resulted in a 25% boost to share prices.
A more plausible explanation is that AI is responsible for fewer layoffs than commonly perceived, particularly as the sole contributing factor. Although AI may be referenced in news releases and can serve as a convenient rationale for executives seeking to deflect attention from layoffs related to underperformance, it constitutes only one component of broader business restructuring—and sometimes a relatively minor one.
Call it an excuse, or a crutch. But aside from the odd example, like Block, businesses are making layoffs for other reasons entirely, but using AI as a lifeline to keep stakeholders on side. Announcing that increased productivity through AI enables the organisation to operate efficiently despite workforce reductions is preferable to attributing cost-cutting measures to failing fundamentals.
It is likely that we will see many more announcements similar to Block’s. It will continue to be a convenient rationale for organizational changes. But another factor is competitive pressure: when a leading competitor claims to leverage AI effectively enough to reduce headcount, other CEOs may feel compelled to follow suit. More significantly, though, is ongoing economic uncertainty since the pandemic prompting many to see AI as one of the only practical ways to navigate the unpredictable challenges ahead. And it seems the market won’t buy an implementation story if it doesn’t come with layoffs.
