AI-Driven Layoffs Undermine Productivity Gains, Study Finds

A new study by Mark Ma, Professor of Business Administration at the University of Pittsburgh, reveals that AI-driven layoffs are counterproductive, damaging employee sentiment and offsetting potential productivity gains. Analyzing millions of job satisfaction reviews on Glassdoor, thousands of corporate financial reports, and hundreds of AI investment and layoff announcements from U.S. public companies over the past five years, Ma and colleagues found a clear pattern: AI investment announcements correlate with job cut announcements, reflecting a corporate strategy that sees workforce reduction as integral to AI adoption. However, stock market reactions to these layoffs were near zero, and employee sentiment toward AI turned sharply negative, especially regarding job security. This anti-AI sentiment is strongly associated with lower firm productivity, negating expected efficiency gains. Management sentiment, in contrast, remained optimistic in earnings calls but bore no significant relationship to productivity. The study suggests that managers should invest in employee skills and create an environment where AI is seen as a tool for augmentation, not replacement, to truly benefit from AI investments.