Earlier this month, software firm Workday announced that it would be laying off more than 1,700 workers – or about 8.5% of its workforce – to redirect investment towards artificial intelligence. The announcement was the latest in a series of mass layoffs that have put hundreds of thousands of workers at Amazon, Intel, Microsoft, and other tech companies out of work over the past several years. Google and Meta are among the tech giants that have cited the need to invest resources in AI development as the reason for cutting jobs. AI is also a part of the rationale behind the raft of mass federal employees layoffs.
Much of the narrative about AI and jobs has focused on the threat of automation: what can AI do as well as – or better than – humans? Research on AI-driven job displacement often focuses on forecasting which jobs or tasks machines could perform in the future, and then estimating how many workers might be displaced due to this automation. A report might tell us that 30% of work hours could be automated by 2030, or a study might predict that 5% of work tasks across the economy could be performed by AI in the next 10 years.
While automation is a risk that needs to be understood and taken seriously, this framing misses a key aspect of what's happening in the economy now. After many tech firms overhired during the pandemic, companies are cutting jobs and investing in AI not to directly replace workers with machines, but to signal to investors that they’re focused on future growth and profitability.
Mass layoffs are nothing new. As Les Leopold argues in his book Wall Street’s War on Workers, for decades corporations have carried out mass layoffs not out of fiscal desperation, but as part of a strategy to further enrich wealthy shareholders through stock buybacks and leveraged buyouts. But now we are seeing how AI hype has become the latest justification for firing workers en masse. Tech firms aren’t waiting around to see what roles AI can and can’t replace before laying workers off. Instead, they're slashing jobs and redirecting resources to AI initiatives because the mere promise of AI-driven efficiency is enough to excite investors and drive up stock prices.
This strategy creates a self-fulfilling prophecy where tech firms devalue human labor to make automation seem inevitable. By carrying out mass layoffs, tech firms signal to investors and workers themselves that workers are replaceable. By reinvesting those resources in AI, firms make it more likely that AI will eventually become capable enough to replace the workers they already decided to eliminate.
The strategy of hyping AI to justify mass layoffs is exemplified by Swedish tech firm Klarna. As Noam Scheiber reports in the New York Times, when the company laid off 700 customer service workers last year, CEO Sebastian Siemiatkowski didn't just announce the cuts – he celebrated them. In media appearances and investor calls, Siemiatkowski proudly predicted that the company's workforce would eventually shrink to less than half its size thanks to AI-enabled productivity gains. As Scheiber reports, Siemiatkowski may even have overstated Klarna’s progress in automating jobs to try to make the company more appealing to investors. For example, while the CEO claimed that AI enabled the company to become so efficient that it halted all new hiring a year and a half ago, journalists have found that the company continues to post job listings for vacant positions. The Klarna example shows how, for some companies, automation isn’t just about replacing workers with machines; it is about redefining human labor as a temporary necessity to be tolerated until AI makes it obsolete. Like many tech firms, Klarna is betting that by hyping AI's potential while disinvesting in workers, they can make their vision of an automated future into a self-fulfilling prophecy.
The Logo of the Department of Government Efficiency
Elon Musk’s so-called Department of Government Efficiency (DOGE) is now bringing the AI-fueled mass layoff strategy to the federal government. Through DOGE, Musk and his allies are experimenting with AI tools “to identify budget cuts and detect waste and abuse,” in agencies like the Department of Education and the General Services Administration (GSA). Staffers report that DOGE aims to reduce GSA’s budget by up to 50%. As the Washington Post reports, “DOGE associates have been feeding vast troves of government records and databases into artificial intelligence tools, looking for unwanted federal programs and trying to determine which human work can be replaced by AI, machine-learning tools or even robots.” In other words, Musk is exploring how he can use AI as justification for carrying out mass layoffs across the federal government. The message these tactics send is clear: decades of public service experience can be dismissed in minutes if an AI system suggests your role is redundant.
The DOGE-led mass layoffs are part of a decades-long conservative project of shrinking the federal workforce and weakening the administrative state. But what's new is how AI hype, and the guise of Silicon Valley efficiency, is being used to add a veneer of technological inevitability to this political project. "The federal government is suddenly being run like an AI startup," writes Kyle Chayka in a recent piece in The New Yorker. When DOGE staffers cite AI assessments as justification for eliminating positions, they're following the same playbook as tech CEOs: using speculative claims about AI capabilities to make workforce reduction seem like an unavoidable consequence of progress rather than a deliberate choice. DOGE's promises of AI-driven efficiency mask the reality that many government functions still require human judgment, institutional knowledge, and public service experience that no algorithm can replace. This combination of hostile management and AI hype isn't just about cutting costs – it's about redefining public service as something that can be evaluated by an algorithm and eliminated at the whims of a tech oligarch.
Fortunately, workers and unions are fighting back, both against AI-driven job displacement in private industry and against DOGE’s attempts to dismantle the public service.
Photo by FMT | CC BY 4.0
Workers are successfully using collective action to establish guardrails around AI usage and ensure technology serves rather than replaces human labor. The nearly five-month strike by the Writers Guild of America (WGA) and the Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) in 2023 was motivated in large part by concerns that Hollywood studios would seek to use AI in ways that undermine workers or replace them altogether. SAG-AFTRA and WGA eventually won contracts that established frameworks for how studios can and cannot use AI during the production process, ensuring that AI cannot replace human writers and actors without their consent and fair compensation. As labor journalist Alex Press reports, similar fights have played out across workplaces in the hospitality, tech, and logistics industries. Through effective strikes and collective bargaining, workers can influence how AI is implemented in the workplace, and secure protections against mass layoffs.Unions representing federal employees are also mounting a host of legal challenges to protect workers and preserve government services. The American Federation of Government Employees (AFGE) and several other unions filed suit to block what it called "arbitrary and capricious" job cuts laid out in the Trump administration’s federal worker buyout program. Meanwhile, the National Treasury Employees Union, which represents workers at the Consumer Financial Protection Bureau, has filed a lawsuit challenging Trump’s directive to halt the Bureau’s operations, which the union alleges violates the constitutional separation of powers. While not directly a response to DOGE’s use of AI, the lawsuits show how unions are taking action to oppose efforts to weaken federal agencies and devalue the work of career civil servants. As DOGE looks to use AI to justify mass layoffs, these lawsuits could establish important legal precedents to help protect workers from arbitrary dismissal based on algorithmic assessments.
Recent job cuts in the tech sector and in the federal government show how AI hype is being used to justify mass layoffs. Through collective action, workers are showing that AI's impact isn't predetermined by technology – it can be shaped through worker power.
