The AI Job Cuts We’re Not Talking About

The recent spate of job cuts in the tech industry has sparked fears that AI is quickly replacing human workers. However, economists argue that the story is more complex than a simple narrative of technological disruption.

High-profile layoffs at Meta and Intuit have dominated headlines, but many experts believe that the impact of AI on the labor market goes beyond job losses. It also includes reduced hiring, particularly for junior and entry-level roles. Companies are delaying recruitment as they struggle to integrate AI into their operations, making it increasingly difficult for younger workers to break into the job market.

Research from Goldman Sachs suggests that AI has reduced monthly payroll growth by approximately 16,000 jobs over the past year, contributing to a 0.1 percentage point increase in the unemployment rate. This phenomenon may not be as dramatic as mass layoffs, but its implications are significant.

One reason for this lack of hiring is that entry-level roles are often easy to automate. Senior positions, on the other hand, are much harder to replace with AI. According to Daniel Keum, associate professor of management at Columbia Business School, this raises questions about what happens to workers who lose their jobs due to automation and whether they’ll be able to adapt to new roles created by AI.

Companies like HiBob’s Ken Matos expect hiring to rebound once major AI investments are complete. However, some experts warn that AI may reshape job requirements, creating new roles that don’t necessarily align with the skills of displaced workers. This could exacerbate the problem of workers struggling to adapt to a changing labor market.

Corporations are also using AI as a convenient excuse for workforce cuts. As EY-Parthenon chief economist Greg Daco points out, framing layoffs in terms of AI investment can send a more positive signal to investors than citing weaker demand or rising costs. However, this PR spin obscures the complex reality that only about 10% of firms currently use AI to produce goods and services.

Many companies are still grappling with how to integrate AI into their operations. As such, it’s essential for policymakers, businesses, and workers to start having a conversation about the future of work before it’s too late. This includes discussing access to education and training for workers in need of new skills and whether companies will invest in upskilling their existing workforce rather than simply laying off vulnerable employees.

As we navigate this uncertain landscape, it’s essential to remember that AI is not a replacement for human workers – at least, not yet. However, what it does mean is that the job market is changing faster than ever before. If companies are serious about embracing the future of work, they need to start investing in their employees rather than just their technology.

The AI job cuts we’re seeing today may be a mere prelude to a more profound transformation of the labor market. Workers will have to adapt to new technologies and changing job requirements – but also demand that companies invest in their future alongside their AI investments. As Dan Freedman, a Google software engineer and member of the Alphabet Workers Union, notes, “We need to start having this conversation now before it’s too late.”