Experts warn of an 'AI layoff trap' that could hurt economic growth, urging reskilling over simple automation #
Imagine building an AI tool that takes over your job. According to Layoffs.fyi estimates, 828,622 people have lost their jobs in 2022 due to tech layoffs.
AI has gone beyond automating entry-level tasks to taking over jobs of the same people who built it. Information-sector output in the US has gained 8% annually, which is triple than the broader economy. Interestingly, total hours worked in the industry also declined. Overall, fewer people are likely generating more output, which is an encouraging signal for CFOs to continue reducing their employee headcounts.
However, reports have emerged that now, former Microsoft and Google engineers earning $500,000 annually are being substituted by AI tools their own teams developed.
A former Meta engineering manager, Susan Smith, who had a total compensation package of over $600,000 annually, was also reportedly let go after surviving four rounds of layoffs. She wasn't asked to leave due to underperformance, but because the AI tools her team was building rendered segments of her work profile redundant.
Elsewhere, former Meta research scientist Anneke Buffone also recently left the company that built Facebook. Buffone raised concerns about internal AI tools, and witnessed colleagues who pushed back against them get removed from the company. These people are not entry-level workers getting displaced by AI, but senior engineers with incomes in the 95th percentile of US earnings.
The Wall Street Journal profiled the phenomenon as 'the biggest winners of the American economy fear they're sinking fast,' highlighting a change in sentiment shift among the tech elite: the same tools they celebrated building are now the tools making them redundant.
Interestingly, companies aren't carrying out layoffs while revenues decline, but when they are growing. For instance, Meta's headcount is flat while its AI investments accelerate. Elsewhere, Google laid off 12,000 employees in 2024 and another round last year, while its cloud AI revenue soared. Microsoft's developer unit was also downsized in the same quarter GitHub Copilot adoption reached record highs. In all, these trends could imply that the mass layoffs are happening during a boom and not a market downturn.
Are All Tech Jobs at Risk? #
The uncertainty around AI affecting jobs is reportedly contributing to broader changes across Silicon Valley. Even an industry historically resistant to organised labour is reportedly seeing renewed interest in unions, with workers citing AI-driven layoffs, heavier workloads, and concerns about how artificial intelligence is being deployed inside companies.
Meanwhile, economists are also beginning to examine the wider consequences of AI-led workforce reductions.
Some researchers warn of an 'AI layoff trap', in which individual companies benefit from automation in the short term, but widespread job losses eventually lower consumer spending and impact economic growth. Some argue that rapid advances in AI will need governments and businesses to rethink workforce training and reskilling programs rather than simply replacing workers with software.
In all, AI is not eliminating every technology job as demand remains strong in AI infrastructure, semiconductor engineering, cybersecurity, cloud computing, and advanced machine learning. However, the skills employers are seeking are changing rapidly, with experience in building, deploying, and managing AI systems increasingly becoming a competitive advantage.
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