Tech Companies Mask AI-Driven Layoffs Behind Vague Terms, Experts Say

As rounds of layoffs continue in a robust stock market and stable economy, many companies are hesitant to explicitly link job cuts to AI technology. However, employment experts suggest that AI is a significant factor behind these workforce reductions, even if it’s hidden under terms like "reorganization" and "optimization." IBM's CEO made headlines in May by admitting that 200 HR employees were replaced with AI chatbots, although he noted that the company's overall headcount has increased due to reinvestment in other areas. Similarly, fintech giant Klarna candidly acknowledged the reduction of its workforce from about 5,000 to nearly 3,000 employees, coinciding with the introduction of AI systems. Klarna's CEO, Sebastian Siemiatkowski, explained the cuts on CNBC, attributing them to the automation capabilities of AI. However, most companies refrain from such transparency. Christine Inge, an instructor at Harvard University, believes that many layoffs can be traced to AI-driven workforce reshaping. She stated, "Very few organizations are willing to say, 'We're replacing people with AI,' even when that's effectively what's happening." Jason Leverant, COO and President of AtWork Group, agreed, noting that framing layoffs as part of a broader operational strategy is easier than admitting they stem from AI efficiencies. Candice Scarborough, director of cybersecurity and software engineering at Parsons Corporation, observed that companies with strong financial health are making these cuts, suggesting a direct correlation with AI adoption. She argued that using vague terms like "restructuring" and "business optimization" helps companies manage public perception and maintain morale. Many companies are reducing roles in content creation, operations, customer service, and HR—areas where generative AI and agentic tools are increasingly capable. This strategic silence, however, carries risks. Companies might overestimate AI's capabilities, leading to unintended consequences. Taylor Goucher, VP of Sales and Marketing at Connext Global, noted that while AI can automate 70%–90% of processes, the remaining 10% often still requires human intervention. Companies may thus adopt a hybrid model of human and AI, but once jobs are cut, they are less likely to be reinstated without significant adjustments. Mike Sinoway, CEO of LucidWorks, highlighted the uncertainty in C-suite decisions regarding AI adoption. His firm's research indicates that executives are often unsure about AI's effectiveness, leading to a combination of AI implementation and offshore hiring to cover gaps. He stated, "Higher-ups are panicking because their AI efforts aren't panning out." Freelancers, particularly those in creative industries like copywriting, graphic design, and video editing, were among the first to be directly informed about their replacement by AI. Inge noted that companies are more willing to disclose AI's role to 1099 workers, as they face less backlash from this group. Duolingo, a language learning platform, faced significant outrage when its CEO, Luis von Ahn, announced plans to phase out contractors in favor of AI, forcing him to backtrack on his statements. This incident likely deterred other companies from being explicit about AI-driven job cuts. Despite the current solid job market, with the U.S. unemployment rate at 4.1% in June 2025, the future looks different. The World Economic Forum's 2025 Future of Jobs report predicts that 41% of global employers plan to reduce their workforce due to AI automation over the next five years. Dario Amodei, CEO of Anthropic, forecasts that generative AI could eliminate up to half of entry-level office worker jobs. Experts agree that a tipping point will eventually force companies to be more transparent about AI's role in layoffs, but by then, the impact will be widespread and potentially irreversible. Industry insiders emphasize the need for companies to adapt and acknowledge the limitations of AI. Transparency and honesty about where AI excels and where human expertise is essential can help mitigate backlash and ensure smoother transitions. However, the current trend of secrecy suggests that companies are prioritizing short-term optics over long-term strategy, which may prove counterproductive as AI's role in the labor market becomes more evident.