Are leaders being honest about so-called AI layoffs?

Economists and analysts are questioning whether automation is truly responsible for many workforce reductions, as US corporate leaders increasingly attribute layoffs to artificial intelligence, claiming the technology is allowing companies to operate with fewer employees.

Over the last year, executives have described restructuring decisions as efficiency gains linked to digital transformation. Some observers, however, believe the explanation reflects branding strategy as much as operational change.

“You can say, ‘We are integrating the newest technology into our business processes, so we are very much a technological frontrunner, and we have to let go of these people,’” said Fabian Stephany, a departmental research lecturer at the Oxford Internet Institute in the Guardian.

In 2025, AI was cited as a reason for more than 54,000 layoffs, according to a December report from consulting firm Challenger, Gray & Christmas.

Major companies cite AI in workforce reductions

Several large employers have linked job cuts to automation initiatives. In January, Amazon laid off 16,000 workers after making 14,000 reductions in October.

Beth Galetti, Senior Vice-President of People Experience and Technology at Amazon, explained in an October memo that the company was restructuring because “AI is the most transformative technology we’ve seen since the internet, and it’s enabling companies to innovate much faster than ever before.

“We’re convinced that we need to be organized more leanly,” Galetti added.

Technology companies have also connected productivity improvements to staffing changes. Hewlett-Packard CEO Enrique Lores, said in a November earnings call that the company would use AI to “improve customer satisfaction and boost productivity”, which means the company could cut 6,000 people in the “next years”.

In April, Luis von Ahn, CEO of Duolingo, announced the company would “gradually stop using contractors to do work that AI can handle”.

Economists question automation narrative

Despite those announcements, analysts say automation alone cannot explain recent layoffs. A January report from market research firm Forrester projected that only 6% of US jobs will be automated by 2030.

Companies could use AI to replace workers in call centers and technical writing, but the technology cannot yet replace most occupations, said JP Gownder, a Forrester Vice President and Principal Analyst.

“A lot of companies are making a big mistake because their CEO, who isn’t very deep into the weeds of AI, is saying, ‘Well, let’s go ahead and lay off 20 to 30% of our employees and we will backfill them with AI,’” Gownder said. “If you do not have a mature, deployed-AI application ready to do the job … it could take you 18 to 24 months to replace that person with AI – if it even works.”

Some economists believe financial and political pressures may be more significant drivers of layoffs than automation.

“Most economists would tell you that that was implausible,” said Martha Gimbel, Executive Director and Co-Founder of the Budget Lab at Yale University. “ChatGPT was only released three years ago … It is not the case that a new technology develops and the workforce adjusts immediately. That is just not how it works.”

Tariffs were cited as the reason for fewer than 8,000 layoffs in the Challenger report, a small share compared with those attributed to AI.

“You have seen a real hesitance among some parts of corporate America to say anything negative about the economic impacts of the Trump administration because they feel that there will be consequences,” Gimbel said. “By saying that the layoffs are due to new efficiencies created by AI, you avoid that potential pushback.”