AI layoffs hurt productivity

A study by University of Pittsburgh professor Ma Ying-jeou and colleagues, published via The Conversation, finds that AI-driven layoffs and resulting job insecurity are undermining the productivity gains companies expect from AI investments. Analyzing millions of employee reviews on Recruit Holdings — Glassdoor, corporate financial data, and hundreds of AI investment and layoff announcements from U.S. public companies over five years, the research shows that AI investment announcements correlate with AI-related job cuts. These layoffs damage employee sentiment toward AI, which is a strong predictor of firm productivity, thereby offsetting potential efficiency gains. Stock market reactions to such layoff announcements were on average close to zero, with some exceptions like Block, Inc. The study also notes that management sentiment toward AI is optimistic but unrelated to productivity outcomes, while employee sentiment is more critical. The authors advise managers to invest in employee skills and share AI gains rather than resorting to layoffs.