5 minBusiness
Most executives say AI hasn’t boosted productivity, yet many still cut jobs
A new study finds that about 90% of executives report no productivity gains from AI, yet many companies continue to lay off workers in the name of AI. The research suggests that AI-driven job cuts and resulting employee insecurity undermine the very conditions needed for AI to improve efficiency.
Business leaders are pouring billions into artificial intelligence, but a growing body of evidence suggests the expected productivity payoff remains elusive. According to a study by researchers at a major U.S. university, about 90% of executives surveyed by the Atlanta Federal Reserve say AI has not yet boosted productivity at their companies. The same study, which analyzed millions of employee reviews and thousands of corporate financial reports, finds that AI-driven layoffs and the resulting job insecurity are actively undermining the conditions needed for AI to make workers more efficient.
The research, conducted by a team of management scholars, examined data from U.S. public companies over the past five years, including AI investment announcements, layoff announcements, employee satisfaction reviews on Glassdoor, and financial performance metrics. The authors found a clear pattern: as the frequency of AI investment announcements rises, so too do announcements of job cuts attributed to AI. This correlation, they argue, reflects a deliberate corporate strategy that treats workforce reduction as an integral part of AI adoption.
Managers at publicly traded firms typically face pressure to show short-term profitability and share price gains after making large investments. The expectation is that if AI makes employees more efficient, the company will need fewer of them to complete the same work. As a result, a quick way to realize that anticipated return is by cutting headcount and lowering labor costs. Some companies even began laying off employees before investing in AI, as a way to free up capital for future AI projects.
However, the stock market reaction to these layoff announcements has been muted. The average return was close to zero, and for more than half of the events, the market reaction was negative or flat. This suggests that these decisions carry significant hidden costs that undermine the gains of AI adoption. The researchers note that while some companies, such as the financial tech platform Block, saw stock prices jump on news of AI-related staff cuts, the overall pattern does not support the idea that layoffs boost shareholder value.
One of the biggest hidden costs, according to the study, is the impact on employee sentiment. Workers are at the center of the AI revolution and must adopt AI in their daily routines to improve efficiency, but AI also threatens their careers and job security. The researchers analyzed millions of employee reviews on Glassdoor and found that AI-related comments were much more negative than the overall tone of reviews. This negativity reflects widespread concerns over corporate AI adoption and anti-AI sentiment among workers.
The study found a strong association between employee sentiment toward AI and firm productivity. When employees fear for their jobs, they are less likely to embrace AI tools, which in turn lowers productivity and offsets potential efficiency gains. The researchers also found that when companies announce AI-related layoffs, employee sentiment toward AI declines sharply. This is consistent with a recent Reuters/Ipsos poll that found half of Americans fear AI could put someone in their household out of work.
In contrast, management sentiment toward AI is consistently optimistic. The researchers analyzed the tone of management discussions in about 10,000 earnings-call transcripts and found that optimism bore no significant relationship to productivity outcomes. Employee sentiment, they conclude, plays a more important role in unlocking the benefits of AI than any optimism among managers.
The authors caution that laying off employees in the name of AI investment is a self-defeating strategy that offsets any expected productivity increase. They advise managers to treat AI hype with caution and to focus on building employee trust and providing adequate training and leadership. The study’s findings highlight a paradox at the heart of the AI boom: companies are investing heavily in a technology that promises to transform work, but the way they are implementing it may be preventing those gains from materializing.
