Companies continue to pour untold sums into adopting AI tools, in a generational industry capital allocation that has yet to meaningfully pay off.
Despite being sold as a way to supercharge productivity, theoretically allowing business leaders to boost earnings while cutting expenses, reality is telling a dramatically different story. Analysts continue to find that AI is failing to boost productivity much at all, rendering the tools — at least so far — into a ludicrously expensive distraction.
And the evidence continues to grow. Most recently, researchers at the National Bureau of Economic Research found that more than 90 percent of executives who responded to a survey admitted that there was “no impact of AI on own-firm employment over the past three years.” Some 89 percent even said there was “no impact on labor productivity” at all.
That’s not stopping them from continuing to lay off staff, as University of Pittsburgh business professor Mark Ma, who was not involved in the research, noted in a recent piece for The Conversation — a sign of the times as companies continue to double down on the tech while job losses mount.
Worse yet, using AI to justify these lay offs could make the situation even worse in other ways.
“AI-driven layoffs and the resulting job insecurity are actively destroying the very conditions needed for AI to make workers more efficient,” Ma wrote. “In fact, these job cuts damage employee sentiment toward AI — which is one of the strongest predictors of firm productivity when AI is used.”
Even investors are unlikely to play along with the ruse, making it an overall self-defeating strategy.
“Managers expect that both AI investment and job cuts will enhance the company’s value,” Ma argued. “Yet when we examined stock market reactions to these layoff announcements, the average return was close to zero.”
Meanwhile, employee morale is plummeting as managers double down on the narrative that they soon no longer will be needed thanks to AI. Look no further than Mark Zuckerberg’s Meta, which has struggled to buoy worker enthusiasm after of sweeping — and poorly executed — layoffs.
Executives have a major hill to climb to reassure this stressed workforce. In a recent analysis of Glassdoor reviews, Ma and his colleagues found a “strong association between employee sentiment toward AI and firm productivity based on the employer’s financial information,” suggesting that “anti-AI sentiment among workers actually lowers productivity and offsets the potential efficiency gains caused by AI.”
In other words, fears over job insecurity could result in companies’ efforts to reap the benefits of AI backfiring.
“In short, employee sentiment plays a more important role in unlocking the benefit of AI than any optimism among managers,” Ma wrote. The takeaway is as clear as it’s ever been. Managers need to stop using AI to justify layoffs, he recommends, which has been a “strategic miscalculation that cuts against the benefits of AI.”
Zooming out, the AI industry is finally beginning to reckon with the reality that the tech has largely failed to live up to the extremely lofty promises leaders used to attract trillions in funding. Even OpenAI CEO Sam Altman admitted over the weekend that “we have not had the iPhone moment of like completely changing how someone interfaces with technology.”
More on AI and productivity: Meta Exec Rages Against Employees Asking for More Time Off Because AI Made Them More Efficient
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