scorecardAI isn't driving tech layoffs — but it does make a good scapegoat
  1. Home
  2. tech
  3. news
  4. AI isn't driving tech layoffs — but it does make a good scapegoat

AI isn't driving tech layoffs but it does make a good scapegoat

Beatrice Nolan   

AI isn't driving tech layoffs — but it does make a good scapegoat
Tech3 min read
  • Layoffs have been sweeping the tech sector and some are blaming AI.
  • However, there's little evidence to show that AI is driving mass cuts in the industry.

Fears about AI leading to job cuts are increasingly common, especially as everyday usage of the technology grows.

Several reports have indicated that the tech would, or already is, impact the labor force.

In January, Duolingo laid off 10% of its contractors. A representative told Bloomberg at the time that "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." The job reduction wasn't a "straight replacement" of workers with AI, they added.

Swedish fintech Klarna froze hiring a month earlier, with its CEO saying AI would pick up the slack from lost staffers when natural attrition occurred.

We may be hearing more about AI's usage at tech companies, but it would be a stretch to say the era of AI-related layoffs is already here.

Fabian Stephany, who lectures about AI at the Oxford Internet Institute, said: "Fighting against robots is a nice cover story," he said. "But if you have a closer look, it's often old school, simple economic dynamics like outsourcing or lead management cutting costs to increase salaries in other places."

But it's unlikely the tech is playing a direct role in the wider cuts across the industry.

Evidence is lacking

Industry leaders have been keen to show investors they are ready and willing to capitalize on the technology.

A Gallup survey from last summer found that 72% of Fortune 500 chief human resources officers think AI is set to replace jobs in their company within three years.

Despite noise about replacing employees with robots, though, there's been little clear evidence this is taking place.

AI is still playing an "ambiguous" role in the labor market, Stephany said. "It's not that on a mass scale jobs are being automated away. It just comes down to augmenting and automating certain things."

Before another round of mass layoffs hit the tech industry in January, there were already reports that companies were starting to incorporate their own AI technology.

The Information reported in December that Google was beginning to rely more on machine-learning techniques to help customers buy ads.

The development was causing anxiety in the ad sales departments, per the report, which later faced a round of job cuts. A spokesperson for the company told Business Insider's Hugh Langley that this reorganization was unrelated to AI tools.

While freelancers and individual workers have expressed suspicions that language-based AI like ChatGPT has stolen work from them, companies undergoing rounds of layoffs have generally refrained from blaming the tech.

A change of focus

While AI may not simply replace workers, companies' investment in AI development may be causing cutbacks in other areas.

As Fortune's Jeremy Kahn notes, many jobs being cut are not generally those where AI replaces the need for human workers. In layoff memos, most of the mentions of AI have centered on refocusing or doubling down on investment into the buzzy tech.

SAP, for example, announced a restructuring plan with a new focus on AI last month — a change that affected about 8,000 employees' jobs.

Dan Ives, a tech analyst at Wedbush Securities, told CNBC that redundancies would likely continue throughout the year, primarily as companies pivot their focus to spending on the AI sector. For example, bringing in new AI talent is expensive and increasingly competitive.

While we'll inevitably see AI more frequently used among tech companies, we should be wary of it being used as a scapegoat for layoffs when other, more familiar factors could also play their part.

A Duolingo representative said in a statement to BI: "At the end of 2023, Duolingo did not renew around 10% of our contractor workforce. In some cases, this was because the contractor's project concluded or because their work was no longer needed due to changes in how we generate and share content between our 100+ language courses."

They added: "In every instance, we attempted to find alternate roles for each contractor before off-boarding as a last resort."

Klarna declined to comment further on the company's hiring freezes.