Replacing workers with AI doesn’t translate into financial gains, yet another study shows

Another day, another study showing that using AI isn’t exactly paying off in the way companies think or hope. It turns out, once again, that layoffs driven by automation are failing to generate substantial returns.

The assumption is pretty logical – if, of course, you believe the AI hype. It’s that the technology will become as skilled as the workers it threatens to displace – and since it’s cheaper, companies will soon be able to massively cut labor costs, especially in the tech sector.

Many tech firms, large and small, have already sacked thousands of employees, openly saying they need to invest heavily in AI and quietly whispering they want to make more money.

But study after study persistently finds that any positive business outcomes are yet to be seen.

Last year, a study from the Massachusetts Institute of Technology found that 95% of generative AI projects delivered little to no revenue growth. In other words, most AI-based initiatives to drive rapid revenue growth are falling flat – there are no savings and no profits.

Now, research and advisory firm Gartner has reached the same conclusion after surveying 350 global business executives whose companies are pulling in at least $1 billion annually.

The trend of seeking AI-powered profits is very real. As many as 80% of respondents admitted to trimming their human staff to make investments in AI or autonomous technology.

Curious what others think about this story? Contribute your thoughts to the debate below.

However, the companies reporting high ROI were not the same ones reporting AI-related workforce reductions, Helen Poitevin, VP analyst at Gartner, who worked on the study, told Fortune.

In other words, executives who laid off workers to invest in AI have achieved the same financial gains as those who kept their employees. There are no detectable returns, period.

“Looking only at layoffs is shortsighted in terms of getting value from AI. Chasing value only through headcount reduction is likely to lead most organizations down a path of limited returns,” said Poitevin.

To be fair, it’s not that simple. For instance, companies might simply be attributing layoffs to the technology as an excuse, in a phenomenon known as “AI washing.”

Alternatively, Poitevin thinks that firms could just be testing the waters rather than initiating a whole structural overhaul. And if we’re dealing with one-time exercises, no meaningful results can be expected.

Still, it’s pretty interesting – and unsurprising – that the most significant gains are seen by companies that are leveraging AI as a form of “people amplification.” This means they’re not firing workers: they’re boosting them.

Then again, the very idea that AI can be cheaper than humans might not be entirely accurate. Tech execs recently began admitting that AI token costs are now overtaking human salaries.

“There’s something ironic in a boss discarding employees to cut costs, only to find the computer bill draining the budget faster than the people they replaced,” our contributor, Neil C. Hughes, noted.

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