Is AI The Cause Of Job Cuts This Year?

When ChatGPT was launched on the last day of November, it punctuated what was, at the time, the largest layoff month of 2022. More people were laid off in November than in every other month of the year combined — more than 44,000 people, according to Crunchbase data.

Perhaps November’s numbers were a harbinger of trying times ahead. Since then, companies have continued layoffs at the same brutal pace. While funding dried up elsewhere, leading to layoffs, venture firms were pouring money into the generative AI movement, where language models were poised to be the next big cash cow.

Indeed, according to Crunchbase data, funding to AI startups made up about 10% of global startup funding. Venture’s dramatic shift in funding priorities has rocked every industry from the art world to health care. And whenever a new piece of technology promises to disrupt an industry, the first worry is that it will replace workers.

“[We’re] pitching the opposite,” said Healy Jones, an executive at the startup consulting firm Kruze Consulting. “AI startups are the only ones really raising big rounds. That’s not to say that AI layoffs aren’t happening, and that some development work isn’t changing. But I haven’t seen the impact.”

AI spurs layoffs in tech

While few — if any — tech startups are actively conducting layoffs to offload work onto AI, the tech industry is quickly embracing artificial intelligence. According to a report from outplacement firm Challenger, Gray & Christmas, which looks at layoffs across every industry, around 5% of May’s job cuts were directly related to artificial intelligence.

“We do believe AI will cause more job loss, though we are surprised how quickly the technology was cited as a reason,” Andy Challenger told Fortune. “It is incredible the speed the technology is evolving and being adapted.”

IBM CEO Arvind Krishna said the company is planning to pause hiring for roles that AI can reasonably do. Positions in human resources, or jobs that aren’t customer-facing, would be on the chopping block. That means 26,000 jobs at IBM could be in part or in whole replaced by AI. The company and its subsidiary Red Hat have laid off around 4,660 people so far in 2023.

On Monday, the homework helper platform Chegg announced it will lay off 4% of the company, or 80 positions, in order to begin deploying its AI strategy. Students have quickly adopted OpenAI tools and ChatGPT to get their homework done, impacting Chegg’s revenue. In the span of three months, the company introduced its own education platform powered by generative AI called CheggMate to rival the open-source tools.

The dangers of AI

But the rapid adoption of AI is likely to require more jobs to babysit the technology.

As of March, U.S.-based jobs on LinkedIn that mentioned GPT increased nearly 80% year over year. And, according to Crunchbase data, startups focused on AI are quickly joining The Crunchbase Unicorn Board as funding to the category speeds up.

Yossi Sheffi, an engineering professor at MIT, said that if anything, AI may, in a way, be a job creator. Workers will need to manage the technology through different, industrywide regulatory frameworks.

“Even if the invention is good and can be adopted, there are a lot of things that inhibit fast adoption,” he said. “How will they be regulated to make sure they aren’t harmful?”

Already, we’re starting to see some changes in the way companies are making staff changes to experiment with AI. At the National Eating Disorders Association, executives fired a slew of support line staffers after they attempted to unionize. The company quietly launched a chatbot, Tessa, to take over those duties. It was quickly pulled after it gave those with eating disorders bad advice — an argument those in the health care industry have used to stave off adopting AI.

“This is scary and there’s no precedent, and no one really knows what’s going on,” said Jeremy Kaufmann, a partner at Scale Venture Partners focused on automation.

Illustration: Dom Guzman

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