High Layoff Wave, Is AI the Culprit?

KOMPAS.com - Layoffs are looming over the global technology industry. In recent times, several tech giants such as Meta and Microsoft have dismissed thousands of employees.

However, amid these high layoff figures, companies’ spending on AI is actually increasing. For instance, Meta cut around 10 percent of its workforce. On the other hand, their AI spending reached hundreds of billions of US dollars.

Responding to this phenomenon, Meta CEO Mark Zuckerberg emphasised that AI is not intended to replace humans but to enhance productivity. He even stated that in the future, “people will become more important, not the other way around.”

However, the phenomenon of high layoff waves accompanied by massive allocations for AI infrastructure appears to reinforce that the technology will replace humans.

Nevertheless, AI does not directly replace humans. AI is instead used as an excuse for companies’ business efficiency decisions by cutting employees.

Cognizant’s Chief AI Officer, Babak Hodjat, said that AI is often made a “scapegoat” in company restructurings.

“Sometimes AI becomes a scapegoat from a financial perspective. This can happen when companies have hired too many people or want to streamline the organisation,” Hodjat told TechSpot.

This view aligns with the phenomenon known as “AI Washing”, where companies use AI narratives to wrap traditional business decisions like cost efficiency.

Even a survey of hiring managers showed that around 59 percent of companies admit they emphasise AI in layoff announcements because “it looks better to stakeholders”.

In addition to AI Washing, the context of the era in which these layoffs and AI developments occur is also important.

During the pandemic, tech companies undertook massive expansions and aggressive hiring. Now, with growth slowing, they are entering a correction phase and are forced to conduct layoffs, accompanied by expansions into AI.

Several tech executives may argue that AI will change the way work is done, not directly replace people. This means AI still plays a role in this change.

Rather than directly replacing jobs, AI is more about changing how work is performed. Companies now demand the same, or higher, output from smaller teams with the help of AI.

Google CEO Sundar Pichai stated that AI adoption has increased engineer productivity by around 10 percent.