AI-Washing: Are Companies Using AI as an Excuse for Mass Layoffs?

Tech companies blamed AI for 150,000+ job cuts — but in New York, not one has officially listed automation as the reason. What's really going on?

Photo by Antonio Feregrino / Unsplash

It's not long since the job market in tech and startups was completely bananas. I was part of that post-pandemic boom myself. In 2021 and 2022, I worked as a recruiter for startups, scaleups and growth companies in Norway.

The salaries on offer were seriously good, and I often wondered how on earth a company with barely any revenue could afford to hire the kind of "premium candidates" they were after. Finding candidates was hard. Workers had it too comfy where they were, and the talent shortage was driving up compensation packages.

Still, this was nothing compared to what I could read about on the other side of the Atlantic. In the US, founders were no longer pitching investors – it was the other way around. Investors were being grilled on why a company should accept their money over someone else's, sending 50-page company-specific pitches to the founders they wanted to invest in. In 2021 alone, American startups raised over $330 billion – more than double the year before.

OpenSea, a platform where you could buy NFTs (remember those?), was valued at over $13 billion. An absolutely enormous valuation when you consider that the company had just 90 employees.

I remember an article from The New York Times in 2022 where investors were interviewed:

"The pot of gold at the end of the rainbow has become bigger than ever", said Mike Ghaffary, an investor at Canvas Ventures to The New York Times in 2022. "You can invest in a company that could one day be a trillion-dollar company.

Nothing but good vibes

The aftermath of the covid pandemic was the era when we could read about newly graduated developers raking in millions a year. NFT companies were swimming in money, and people were speculating wildly on digital art. But then dark clouds appeared on the horizon.

To keep investors interested and speculators on the hook, startups hired Chief Vibes Officers. Their job was to keep the mood among shareholders positive. Spread good vibes, basically. Put simply, the vibes chiefs were part marketers, part influencers, and the point of contact for investors.

With all of this as a backdrop, we really should have seen that things had been stretched way beyond breaking point.

Mass layoffs

So far this year, 80 tech companies account for nearly 42,000 layoffs according to Layoffs.fyi – a site that tracks layoffs in the US tech industry. One of these companies is the software giant Oracle. A week ago, the company announced it would be cutting several thousand positions.

Why is this happening?

In Oracle's case, they're in a data centre arms race with other tech giants like Amazon. Enormous amounts of money are being spent on building out infrastructure like data centres.

We're already seeing that the intelligence tools we're creating and using, paired with smaller and flatter teams, are enabling a new way of working which fundamentally changes what it means to build and run a company.

Those are the words of Jack Dorsey, best known as the founder of Twitter. Today he leads Block, which provides payment solutions for consumer-facing businesses. At the end of February, he announced that Block would be getting rid of roughly 4,000 employees – about 40 per cent.

AI-washing

Research firm Challenger, Gray & Christmas has mapped out why companies are cutting positions. In over 150,000 cases, artificial intelligence was listed as the reason for redundancies. Both Amazon and the social media platform Pinterest have pointed to AI as the reason behind their downsizing.

I started thinking about this last summer, when we could read about a string of Norwegian businesses laying people off. Many believed AI was to blame – and while it was strongly hinted at, it wasn't explicitly said by the companies themselves. Yet suddenly, layoffs had gone from something that would traditionally worry shareholders and investors, to a move that signalled just how forward-leaning a company was. AI became a get-out-of-jail-free-card that companies used all too readily.

The vast majority of companies are at a stage where AI is still being worked on and integrated into the business. Perhaps it's a pre-emptive measure to lay off employees now, a measure I consider a high-risk gamble; betting that AI can replace your workforce already.

The question I ask myself is: if you have such unwavering faith that AI is going to be a game changer, why not keep the people while AI makes its entrance into the business? Surely that would give you an absolutely enormous productivity boost.

But the more I look for answers, the more I keep coming back to the same thing: Artificial intelligence is easy to blame in a time when the company is being forced to make unpopular moves.

I've quoted Molly Kinder before. She's a senior research fellow at the Brookings Institution who studies AI and the labour market, and she seems to agree with me. Speaking to The New York Times, she suggested that this kind of "AI-washing" sends a signal to the market – allowing executives to say they're cutting-edge, that they've adopted AI and figured out how to make savings. A much more investor-friendly message than admitting the business is struggling.

Is AI really the reason?

In February, the US tech publication Wired mapped how many businesses in New York have cited AI as the reason for layoffs.

In New York, companies are required to state why they're downsizing, in what's known as a WARN (Worker Adjustment and Retraining Notification) report. Among the original seventeen options you'll find bankruptcy, acquisition, relocation, and mergers. But in January 2025, another option was added: technological innovation or automation.

The interesting thing is that among 162 companies, with a total of 28,300 layoffs, not a single one has ticked the box for innovation or automation as the reason for downsizing. In June 2025, CEO Andy Jassy published a note to his employees in which he said:

As we roll out more Generative AI and agents, it should change the way our work is done. We will need fewer people doing some of the jobs that are being done today, and more people doing other types of jobs. It's hard to know exactly where this nets out over time, but in the next few years, we expect that this will reduce our total corporate workforce as we get efficiency gains from using AI extensively across the company.

To me, this sounds like a textbook example of technological innovation reducing the need for human labour.

Which is why it's particularly interesting to read what Amazon spokesperson Kelly Nantel told Wired. Just months after Jassy's letter, Nantel claimed that "AI is not behind the vast majority of the cuts", and that instead the goal is to reduce layers, increase ownership, and help cut bureaucracy.

Amazon is among the companies having had til file a WARN. They did not list technology advances as the reason for job cuts.

What's actually going on?

And so this is where we are, in a confusing blame game about the future of work. Nobody is really quite sure what's happening, or why.

Maybe artificial intelligence is eliminating the need for human labour.

Or was it all AI-washing all along?