Tech Companies Use AI as Cover for Layoffs, Expert Says
Wix announced layoffs of roughly 1,000 employees-about 20% of its workforce-last week, citing AI as a key reason the company needs to restructure. CEO Avishai Abrahami called AI "the most significant shift in how companies are built since the invention of modern programming languages in the 1970s," and said Wix must become "a faster, leaner, and flatter organization."
Wix is the latest in a string of tech companies framing workforce cuts around AI. Block's CEO Jack Dorsey announced 4,000 layoffs in January using similar language about "smaller and flatter" teams. Snap and Atlassian executives have deployed comparable framing.
But Paul Osterman, a professor emeritus of human resources management at MIT Sloan School of Management, says this pattern reveals something companies have been reluctant to admit: they don't actually want more workers.
A Familiar Pitch With New Branding
"They've been saying that for 20 years," Osterman said of the push for smaller, more productive teams.
What's changed is the excuse. Osterman argues companies are using AI as cover for layoffs-a practice he calls "AI washing"-to reframe bad news as innovation. The strategy appears to work. Cisco's stock jumped 13% after it announced 4,000 layoffs earlier this month.
"AI is a perfect excuse to justify big layoffs," Osterman said. "It makes it seem as if it's not our decision, our fault-it's the technology."
Companies have used recessions the same way for decades, laying off employees they planned to cut anyway and blaming external conditions.
The Rise of Disposable Workers
The uptick in AI-related layoffs connects to a broader shift in the American workforce. Osterman estimates that 35% of workers today are "disposable workers"-contractors, freelancers, and gig workers who can be shed quickly without severance or benefits costs.
The Bureau of Labor Statistics counted 6.9 million contingent workers in 2023, representing 4.3% of the workforce. That's up from 3.8% in 2017.
Employers favor this arrangement because it cuts benefit costs and provides flexibility to scale up or down-useful when AI creates uncertainty about future labor needs.
The Cost to Workers
Research shows contractors and temporary workers earn lower wages and report lower job satisfaction than permanent employees. They're also less likely to go above and beyond for their employers.
Osterman pushed back on the idea that workers should simply accept this trajectory. "We created a stable employment system of high wages and shared prosperity in the past," he said. "That's what we should be thinking about doing now."
For HR professionals navigating these shifts, understanding the distinction between genuine AI-driven restructuring and "AI washing" is critical. Learn more about AI for Human Resources and how to evaluate workforce strategy claims, or explore the AI Learning Path for CHROs for deeper insights into AI's actual impact on talent management and organizational structure.
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