Laying off workers because of AI is more of a fashionable excuse than a real business imperative, study suggests
Investment
Fortune

Laying off workers because of AI is more of a fashionable excuse than a real business imperative, study suggests

July 31, 2025
12:48 AM
6 min read
AI Enhanced
investmentbusinesseconomy

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Companies are spending on new AI investments more than they are spending on AI as a worker alternative.

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6 min read

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investment

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July 31, 2025

12:48 AM

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Fortune

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·Artificial IntelligenceLaying off workers because of AI is more of a fashionable excuse than a real imperative, study suggestsBy Matt O'BrienBy The Associated PressBy Matt O'BrienBy The Associated Press Why are people really being laid off?AP Photo/Nam Y

HuhIf you read the typical 2025 mass layoff notice from a industry CEO, you might think that artificial intelligence cost workers their jobs

The reality is more complicated, with companies trying to signal to Wall Street that they’re making themselves more efficient as they prepare for broader changes wrought by AI

A new report Wednesday from career website Indeed says job postings in July were down 36% from their early 2020 levels, with AI one but not the most obvious factor in stalling a rebound

ChatGPT’s debut in late 2022 also corresponded with the end of a pandemic-era hiring binge, making it hard to isolate AI’s role in the hiring doldrums that ed. “We’re kind of in this period where the job market is weak, but other areas of the job market have also cooled at a similar pace,” said Brendon Bernard, an economist at the Indeed Hiring Lab. “ job postings have actually evolved pretty similarly to the rest of the economy, including relative to job postings where there really isn’t that much exposure to AI.” The template for CEO layoff notices in 2025 includes an AI pivot That nuance is not always from the last six months of layoff s, which often include a nod to AI in addition to expressions of sympathy

When he announced mass layoffs earlier this year, Workday CEO Carl Eschenbach invited employees to consider the bigger picture: “Companies everywhere are reimagining how work gets done, and the increasing demand for AI has the potential to drive a new era of growth for Workday.” Autodesk CEO Andrew Anagnost explained that a need to shift resources to “accelerate investments” in AI was one of the reasons the company had to cut 1,350, or 9%, of workers

The “Why We’re Doing This” section of CrowdStrike CEO George Kurtz’s announcement of 5% job cuts said the cybersecurity company needed to double down on AI investments to “accelerate execution and efficiency.” “AI flattens our hiring curve, and helps us innovate from idea to duct faster,” Kurtz wrote

It’s not just U.S. companies

In India, giant Tata Consultancy Services recently characterized its 12,000 layoffs, or 2% of its workforce, as part of a shift to a “Future-Ready organization” that would be realigning its workforce and “deploying AI at scale for our clients and ourselves.” Even the Japanese parent company of Indeed and Glassdoor has cited an AI shift in its notice of 1,300 layoffs at the job and workplace review sites

AI spending, not replacement, is a more common factor Microsoft, which is scheduled to release its fourth-quarter earnings Wednesday, has announced layoffs of 15,000 workers this year even as its fits have soared

Microsoft CEO Satya Nadella told employees last week the layoffs were “weighing heavily” on him but also positioned them as an opportunity to reimagine the company’s mission for an AI era. mises of a leaner apach have been welcomed on Wall Street, especially from giants that are trying to justify huge amounts of capital spending to pay for the data centers, chips and other components required to power AI nology. “It’s this of double-edged sword restructuring that I think a lot of giants are encountering in this age of AI, where they have to find the right balance between maintaining an appriate headcount, but also allowing artificial intelligence to come to the forefront,” said Bryan Hayes, a strategist at Zacks Investment Re

Google said last week it would raise its budget for capital expenditures by an additional $10 billion to $85 billion

Microsoft is expected to outline similar guidance soon

The role of AI in job replacement is hard to track One thing is to Hayes: Microsoft’s job cuts imve its fit margin outlook for the 2026 fiscal year that started in July

But what these broader industry layoffs mean for the employment spects of workers can be harder to gauge. “Will AI replace some of these jobs? Absolutely,” said Hayes. “But it’s also going to create a lot of jobs

Employees that are able to leverage artificial intelligence and help the companies innovate, and create new ducts and services, are going to be the ones that are in high demand.” He pointed to Meta Platforms, the parent company of Facebook and Instagram, which is on a spree of offering lucrative packages to recruit elite AI scientists from competitors such as OpenAI

The reports published by Indeed on Wednesday show that AI specialists are faring better than standard software engineers, but even those jobs are not where they have been. “Machine-learning engineers — which is kind of the canonical AI job — those job postings are still noticeably above where they were pre-pandemic, though they’ve actually come down compared to their 2022 peak,” said Bernard, the Indeed economist. “They’ve also been impacted by the cyclical ups and downs of the sector.” Economists are watching for AI’s effects on entry-level jobs hiring has particularly plunged in AI hubs such as the San Francisco Bay Area, as well as Boston and Seattle, according to Indeed

But in looking more closely at which workers were least ly to get hired, Indeed found the deepest impact on entry-level jobs in the industry, with those with at least five years of experience faring better

The hiring declines were sharpest in entry-level industry jobs that involve marketing, administrative assistance and human resources, which all involve tasks that overlap with the strength of the generative AI tools that can help create documents and images. “The plunge in hiring started before the new AI age, but the shifting experience requirements is something that happened a bit more recently,” Bernard said

Microsoft, which is staking its future on AI in the workplace, has also had its own reers look into the jobs most vulnerable to the current strengths of AI nology

At the top of the list are knowledge work jobs such as language interpreters or translators, as well as historians, passenger attendants, sales representatives, writers and customer service representatives, according to Microsoft’s working paper

On the other end, leading in work more immune to AI changes were phlebotomists, or healthcare workers who draw blood, ed by nursing assistants, workers who remove hazardous materials, painters and embalmers

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