Study finds AI-driven layoffs destroy the productivity gains they aim to create

Companies that cut workers in the name of artificial intelligence are caught in a deepening paradox: their productivity gains have failed to materialize, and the talent they let go is proving far harder to bring back. New research published Wednesday offers a stark warning to managers who view headcount reduction as an integral part of their AI strategy.

The Productivity Trap

A study published August 12 in The Conversation found that AI-driven layoffs actively undermine the conditions needed for AI to boost worker efficiency. Researchers analyzed millions of job satisfaction reviews on Glassdoor, thousands of corporate financial reports, and hundreds of AI investment and layoff announcements by U.S. public companies over five years. They discovered that as companies announce more AI investments, they also announce more AI-related job cuts — and the resulting fear among remaining employees drives anti-AI sentiment that correlates with lower firm productivity.techxplore+1

About 90% of executives believe AI has not yet improved productivity at their companies, according to an Atlanta Federal Reserve study cited in the research. When the researchers examined stock market reactions to AI-linked layoff announcements, the average return was close to zero — suggesting investors see through the strategy.techxplore

"Employee sentiment plays a more important role in unlocking the benefits of AI than any optimism among managers," the researchers concluded.techxplore

The Rehiring Problem

The damage extends beyond morale. According to InformationWeek, companies that cut staff are now scrambling to rehire — but finding that broken trust is the hardest obstacle to overcome. More than 122,000 technology workers were laid off in 2025, and a further 126,000 have been cut in 2026, according to data from Layoffs.fyi cited in the report.informationweek

"You'll get their labor but not their loyalty," said Ali Gohar, CHRO at Software Finder. Replacing experienced employees can cost one and a half to two times the salary initially saved, multiple hiring executives told InformationWeek. Nearly 29% of companies that cut staff for AI have already reopened those same positions, according to talent firm Robert Half, often at salaries 20 to 35% higher than what the eliminated jobs paid.metaintro+1

CNBC reported in July that firms including Ford ↗ 0.43%, IBM International Business Machines Corporation ↗ 0.49%, and Commonwealth Bank of Australia are refocusing on human capital after making AI-linked layoffs.cnbc

A Self-Defeating Strategy

The twin findings paint a picture of corporate miscalculation. Companies that treat workforce reduction as AI strategy end up with demoralized employees who resist the very tools meant to make them more productive — and when they reverse course, they face a labor market that remembers how it was treated.

"Rebuilding a cut role typically costs one and a half to two times the salary you 'saved', and the returning employee now knows exactly what your loyalty is worth," said Lee McCabe, founder of private equity firm Claymore Partners.informationweek