Business leaders are pouring billions into artificial intelligence, but a growing body of research shows that the expected productivity gains are failing to materialize. The reason, according to a new academic study, directly contradicts the prevailing strategy: laying off workers to fund AI adoption is actively destroying the conditions needed for the technology to succeed.
Researchers analyzed millions of employee satisfaction reviews, thousands of corporate financial reports, and hundreds of AI investment and layoff announcements from U.S. public companies over the past five years. They found a "clear pattern: As the frequency of AI investment announcements rises, so too do announcements of job cuts caused by AI." This correlation, the researchers argue, reflects a deliberate corporate strategy that treats workforce reduction as an integral part of AI adoption.
The study, conducted by Mark Ma and colleagues at the University of Pittsburgh, found that employee sentiment toward AI is one of the strongest predictors of firm productivity when AI is used. When companies announce layoffs tied to AI, worker sentiment toward the technology sharply declines. "Many employees are resisting AI because they have watched their colleagues lose jobs to it or fear they will be next," the researchers wrote.
The hidden cost of layoffs
After investing heavily in AI, managers at publicly traded firms face pressure to show a strong financial return. The expectation is that if AI makes employees more efficient, the company will need fewer people for the same work. So a quick way to realize returns is to cut headcount and lower labor costs.
But the stock market's reaction to these layoff announcements was muted. The average return was close to zero, and for more than half of the events studied, the reaction was negative or flat. This suggests, the researchers said, that these layoffs carry "significant hidden costs that undermine the gains from AI adoption."
Employee sentiment versus management optimism
To understand what drives workers' hostility toward AI, the researchers examined employee reviews. Along with fears of job loss, workers cited a lack of proper training, few opportunities to upgrade skills, and poor corporate AI leadership. "Comments about job security concerns were by far the most critical," the study found.
In contrast, analysis of management discussions in nearly 10,000 earnings calls showed that executives consistently expressed optimism about AI. But that sunny outlook "bore no significant relationship to productivity outcomes."
"Employee sentiment plays a more important role in unlocking the benefit of AI than any optimism among managers," the researchers concluded.
Why this matters for HR professionals
The findings offer a clear directive for HR leaders: managing how employees feel about AI is key to unlocking its benefits. Thats means creating an environment where workers believe AI is working with them, not against them. The study recommends making a genuine commitment to share AI gains with employees by investing in skills and expanding opportunity rather than simply laying them off. Companies that ignore this dynamic and continue to pair AI investment with job cuts are likely to be left with a demoralized workforce and a disappointing return on their technology spending. For HR professionals, this means advocating for training programs, clear communication about career impacts, and a corporate culture that positions AI as a tool for growth. For more on AI productivity strategies and how they affect teams, explore our related resources. A deeper look at AI adoption for management can offer more context for building a culture that supports both workers and technology.
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