The tech industry has laid off more than 32,000 employees so far. What's the reason? The same factors that have made 2023 a difficult and uncertain year for job security: hiring mismanagement, struggling advertising revenues, and a sluggish economy that has forced companies to cut costs (and in many cases, layoffs).
But while companies blame the economic downturn for stunting growth, there's another big factor: the adoption of artificial intelligence (AI) and machine learning (ML) models. AI transformations drove more headcount cuts than the economic slowdown last year, and continue to do so this year.
According to a study published by Challenger Grey, the rise of artificial intelligence (AI) poses a major threat to white-collar jobs, with employees in a wide range of fields, including programmers, business executives, lawyers, accountants, finance and insurance professionals, and consultants, at risk of losing their jobs to automation.
The report highlights that US companies laid off a staggering 82,307 employees in January, a massive 136 percent increase from December. The financial services sector led the way in job cuts in January, reporting 23,238 layoffs, the highest number since September 2018. Closely followed by the technology industry, which announced 15,806 job cuts, a significant increase from the previous month.
The food manufacturing sector also faced challenges, seeing 6,656 job cuts, largely due to rising costs and automation. Similarly, retailers announced 5,364 job cuts, a significant increase on the previous month. Despite a decline in overall job cuts, media outlets have reported a surge in job cuts, with 528 job cuts made in January, the highest monthly figure in almost a year.
What are the reasons behind these cuts? In January, “restructuring” was cited as the main cause of job losses, with 28,329 layoffs, followed by 14,555 cuts due to the “closure” of factories, stores and units. However, artificial intelligence was blamed for 381 layoffs in January alone. Since May 2023, when Challenger began tracking this reason, it has recorded that around 4,628 layoffs have been attributed to artificial intelligence. Companies have shifted to developing AI and hiring for related roles, or replaced some tasks and roles with AI.
“The impact of the rapid adoption of artificial intelligence is starting to be felt in terms of employment particularly in the media and technology sectors, but really across all sectors, although companies are not blaming AI for many dismissal decisions,” Challenger said.
Interestingly, while AI is being blamed for job cuts, the growth in AI and machine learning is also causing companies to increase hiring in related fields. According to a CompTIA report, there has been a surge in demand for AI and machine learning skills among companies, with related fields posting 33,727 job openings in January alone, the largest monthly increase in a year.
