AI isn’t paying off in the way companies think. Layoffs driven by automation are failing to generate returns, study finds
The ongoing dialogue regarding the ever-imminent displacement of white-collar workers by AI is predicated on the assumption that the technology will become as skilled as the very workers it threatens to displace, thereby cutting labor costs. But a new study found that’s not quite what’s playing out in many companies that have carried out AI-related layoffs. A survey of 350 global business executives with an annual revenue of at least $1 billion by the research and advisory firm Gartner found that many have reduced their workforce irrespective of AI adoption. While 80% of those surveyed who have piloted an AI or autonomous technology have reported workforce reductions, the businesses cut jobs due to automation regardless of whether the technology was actually generating returns. “Looking only at layoffs is shortsighted in terms of getting value from AI,” Helen Poitevin, VP analyst at Gartner and a key researcher of the study, told Fortune. “Chasing value only through headcount reduction is likely to lead most organizations down a path of limited returns.” The looming threat of AI automation has many employees fearing for their jobs. But a growing number of business leaders and economists are skeptical that the technology will actually spur layoffs. Apollo chief economist Torsten Slok recently argued the Jevons paradox: a 19th century theory that explained why the demand for coal increased even as steam engines became more efficient and coal became cheaper. The paradox also applies to the AI age, Slok argued, and it predicts the technology will lead to more jobs, not less. Where companies see returns with AI implementation Poitevin said the companies reporting high ROI were not the same ones reporting AI-related workforce reductions. In fact, workforce reduction rates were nearly equal for those reporting higher ROI and those with smaller returns or even worsened outcomes from autonomous operations. “That’s not where the value is,” she said of layoffs. “ThatR