Sunday, February 25, 2024

Tech companies are slashing thousands of jobs as they pivot toward AI

How will artificial intelligence impact the workplace?

How will artificial intelligence impact the workplace?

4:42 p.m.

Tech companies are investing heavily in artificial intelligence, and some workers are already paying the price.

SAP is the latest big tech player to cut jobs by investing in AI. The German software giant announced this week that it would invest more than $2 billion to integrate artificial intelligence into its business as part of what it called a “transformation program.” ” At the same time, the company announced plans on Tuesday to restructure 8,000 positions. Some workers will be laid off, while others will be retrained to work with AI.

The company said it expects to employ about the same number of workers at the end of the year as it does today.

SAP is no exception. In just over a year, generative AI tools like ChatGPT, based on what we call large language model technology, have been made publicly available, a number of major tech companies have announced plans to move into AI – job cuts often ensue.

“I would advise people to watch what companies are doing, and if they say the presence of large language patterns allows them to lay people off, that needs to be taken into account,” said Mark Muro, a senior fellow at Brookings. Institution that studies the interaction between technology and people. “There is no doubt that future work will show that coding and many engineering-type professions have very high levels of exposure. [to AI]. So we should take them literally on this point. »

Last week, Alphabet-owned Google announced it had laid off hundreds of workers from its ad sales team as it invested more in AI. Although Google did not directly attribute the layoffs to AI, in a memo to employees obtained by Business Insider Google Chief Business Officer Philipp Schindler discussed the “profound moment we are in with AI.” by announcing the cuts.

Microsoft is also doubling down on AI, investing billions in ChatGPT creator OpenAI, because it eliminates jobs. And language learning platform Duolingo acknowledged a 10% reduction in its contractor workforce at the end of 2023, but denied that any reductions were linked to increased use of AI.

“In some cases, this was because the contractor’s project was completed, and in other cases, because the contractor’s work was no longer needed due to changes in the way we generate and share content across our 100+ language courses,” a spokesperson told CBS MoneyWatch. .

Duolingo added that it sometimes uses AI to generate sentences and translations and that AI can help entrepreneurs work faster.

Is AI already replacing humans?

To be sure, some companies are shifting investments toward AI while cutting spending in other areas of their business, leading to layoffs. Oded Netzer, a business professor at Columbia University, cautioned against linking increased corporate investment in AI to layoffs.

“We know that 2023 has been the year of generative AI and companies have invested heavily in it,” he told CBS MoneyWatch. “That means they’ve decided to invest less in some jobs and maybe they’re laying off workers. But it also means that the jobs they’re hiring for are AI-related. That doesn’t mean that AI replaces jobs.”

According to Netzer, companies are simply doing what they usually do: hiring more specialized workers in fast-growing areas of the business, while laying off those whose skills may be less useful or contribute less to revenue growth. For example, he said, as Microsoft invests in AI, it might decide to reduce its production of computer hardware, such as keyboards.

Still, recent layoffs in the tech sector may be a troubling sign for employees who have been told that AI will eliminate some of the rote work associated with their jobs, allowing them to focus on more work. creative or productive. With technology prevalent across all types of businesses in different industries, large tech companies can serve as a barometer for the rest of the economy.

“All kinds of businesses are using digital technologies, so I think it’s a sobering signal. It seems like these impacts are happening pretty quickly,” Brookings’ Muro said.

Eliminating workers as they invest in AI is “low-hanging fruit” for companies, he added. Still, much remains to be seen about how the AI ​​revolution will play out in the workplace.

“A lot of training and job retraining could be a common outcome. There could be layoffs as other jobs are upgraded,” he said.

AI could replace 30% of working hours by 2030, new study finds


Cory Stahle, an economist at the Indeed Hiring Lab, told CBS MoneyWatch that AI tools are not yet sophisticated enough to fully replace workers. They may be able to perform some job functions, but still require human input and supervision. The layoffs are also likely linked to companies consolidating their workforces after carrying out massive hiring during the pandemic, he added.

“They are rebalancing after the huge hiring explosion we saw a few years ago during the pandemic, when people were at home and consuming more tech products than they normally would have “Stahle said. “Now they are flying again and staying in hotels, and changing consumer demand requires an adjustment at these tech companies.”

If AI really were the culprit, layoffs would be much more widespread across various sectors, according to Stahle. “And we haven’t seen that happen yet,” he said.

High interest rates are also contributing to layoffs at tech companies. “Tech companies are still very sensitive to high interest rates and layoffs in a high interest rate environment,” said Tania Babina, a professor at Columbia University’s business school. “When money is cheap, tech companies hire in droves; when money is expensive, they tighten their belts. So far, there is no systematic empirical evidence that companies are using AI to replace the workforce,” she said.

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