AI Is Driving More Layoffs Than Companies Want to Admit

AI Is Driving More Layoffs Than Companies Want to Admit·Bloomberg
Jo Constantz
Updated 6 min read
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(Bloomberg) — United Parcel Service Inc.’s largest layoffs in its 116-year history were made possible, in part, by new technologies including artificial intelligence, CEO Carol Tomé said last week. Citing one example, she said that machine learning allows salespeople to put together proposals without having to ask pricing experts for guidance.

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UPS is among a growing number of companies facing an AI two-step of sorts: Showing investors how AI helps do more with less while simultaneously avoiding the fear-mongering that comes with directly linking technology with job cuts. A UPS spokesperson later said AI is not replacing workers, and that executives did not make an explicit connection between AI and the permanent layoffs on the company’s earnings call.

BlackRock Inc. last month said it would dismiss about 600 employees. In a memo to staff, CEO Larry Fink and President Rob Kapito pointed to dramatic industry shifts “and perhaps most profound, new technologies are poised to transform our industry — and every other industry.” While Fink has been outspoken about his belief in AI’s potential to turbocharge productivity, the new tech was not cited as a reason for the cuts. The asset manager still expects to have a larger staff by the end of the year as it expands certain parts of the business, according to the memo.

Experts struggle to get an accurate picture of just how many jobs are being eliminated as AI rapidly advances. Since last May, US companies have announced more than 4,600 jobs cuts in order to free up resources to hire people with AI experience or because the technology replaced tasks, according to outplacement firm Challenger, Gray & Christmas Inc. But that estimate is “certainly undercounting” the true total, Senior Vice President Andrew Challenger said in an interview.

“There are probably more jobs in the economy that are being cut because of AI already than are getting attributed to that or announced. Every time a company mentions it, they get headlines across every news outlet for like a month,” Challenger said. “They would rather go under the radar most of the time.”

Last spring, International Business Machines Corp. drove headlines across the world when Chief Executive Officer Arvind Krishna told Bloomberg the company planned to pause hiring it thinks it could soon replace with AI. An IBM spokesperson said the company does not have a hiring freeze in place and plans to keep headcount level this year.

Johnny Taylor, CEO of the Society for Human Resource Management, agreed that many of these kinds of cuts will happen quietly.

“IBM was a leader and was public about it, and got beaten up pretty bad,” Taylor said in an interview in December. “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.”

Many firms may do that by significantly slowing hiring, he said. “We will wake up three years from now and see much leaner organizations,” he said. “They will have replaced you without making a big announcement.”

So far, most AI-related cuts have been in the tech industry, according to Challenger’s tally. Some companies, like homework help site Chegg and programmer help site Stack Overflow, cut staff after their businesses were directly undercut by AI products. Other companies, like file-storage service Dropbox, raced to refocus on the new technology, letting go of staff to make way for new hires with AI skill sets.

After IBM, only a handful of companies have explicitly tied AI to job cuts or hiring freezes.

In December, the Swedish buy now, pay later firm Klarna Inc. said it would freeze hiring as tools like OpenAI’s ChatGPT cut down the time certain tasks take. “We need fewer people to do the same thing,” CEO Sebastian Siemiatkowski told the Telegraph. “The right thing for us is just to say: ‘let’s not recruit now, let’s see how this plays out.’” A spokesperson for Klarna declined to comment further.

In January, language-learning software company Duolingo Inc. chose not to renew about 10% of its contractors.

“We just no longer need as many people to do the type of work some of these contractors were doing. Part of that could be attributed to AI,” a spokesperson told Bloomberg, adding that Duolingo does not have a hiring freeze in place and is actively recruiting for a wide range of roles. The company said no full-time employees were affected and that the job reduction isn’t a “straight replacement” of workers with AI, as many of its full-time employees and contractors use the technology in their work.

These companies aren’t alone in their thinking, even if others don’t say it out loud: Three out of four Fortune 500 chief human resources officers surveyed by Gallup last year said they see AI replacing jobs in their company in the next three years.

“Let's not pretend — jobs are going to go away because of AI," said Bob Toohey, chief human resources officer at insurer Allstate Corp., adding that he was referring to the overall labor market, not his company specifically. “There will be jobs lost, and also jobs enhanced.”

In his own department, Toohey said AI will change the work of the so-called learning and development teams that train Allstate employees in, say, a new method of handling claims. What once was a three-week process of creating content can now take less than a day. “We are right in the throes of this now,” he said.

In the tech industry, some top executives have warned AI could eliminate certain jobs, with Elon Musk going so far as to say, “There will come a point where no job is needed.” But for the companies currently introducing AI to workers, there's often a more positive spin.

“The big thing you’ll hear companies say is they’re not focused on elimination, but augmentation — trying to make people more effective and efficient,” Challenger said. “But clearly there are a lot of scenarios right now where one person could do the work of four or five people with the help of AI in a way they couldn’t a year ago. That’s playing out on the ground even if we’re not hearing about it in big announcements from organizations.”

—With assistance from Matthew Boyle.

(Updates with comments from Allstate. An earlier version of this article corrected the spelling of Carol Tomé’s name.)

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