'You should be investing in them becoming AI-capable, AI-literate people,' expert says
Companies blaming artificial intelligence for job cuts may be using the technology as cover for deeper management failures, a leading AI researcher has warned, a pattern that appears to be playing out globally.
Toby Walsh, chief scientist at the UNSW Sydney AI Institute, said some organisations are attributing redundancies to AI investment when the real causes are poor performance and mismanagement.
"There's a bit of AI washing," Walsh said in UNSW's The Business Of Podcast.
"A company that's been perhaps not very well managed, and rather than saying that we've been poorly managed, they've been saying: 'Well, we're investing in AI.'"
Walsh noted that the incentive to frame job cuts as AI-driven is partly financial, saying that businesses linking restructuring to an AI strategy tend to be rewarded by markets.
"So the CEO, he or she looks good if you say, it's AI and you're making 10% layoffs of your staff, as opposed to admitting, 'well, actually, it was my fault, and we've been very well managed,'" he added.
The concern is echoed by economists and analysts in the United States, where AI washing has come under increasing scrutiny.
A December report from outplacement firm Challenger, Gray & Christmas found that AI was cited as a factor in more than 54,000 US layoffs in 2025. By contrast, tariffs were blamed for fewer than 8,000 job losses over the same period.
Economists say that gap is hard to explain given how recently AI entered widespread commercial use.
"Most economists would tell you that that was implausible," said Martha Gimbel, executive director and co-founder of the Budget Lab at Yale University.
"ChatGPT was only released three years ago … It is not the case that a new technology develops and the workforce adjusts immediately. That is just not how it works."
Fabian Stephany, a departmental research lecturer at the Oxford Internet Institute, said AI can serve as a convenient rationale for cuts made for more conventional reasons, allowing executives to position themselves as technological frontrunners by saying they are integrating the newest systems and therefore "have to let go of these people."
JP Gownder, a Forrester vice-president and principal analyst, warned that some companies may be moving too quickly in assuming AI can replace large numbers of staff.
"A lot of companies are making a big mistake because their CEO, who isn't very deep into the weeds of AI, is saying, 'Well, let's go ahead and lay off 20 to 30% of our employees and we will backfill them with AI,'" he said.
AI's blurring employment impact
The distinction between genuine AI-driven displacement and AI washing matters because it distorts public understanding of how quickly the technology is actually replacing jobs.
Walsh warned that the most visible impact so far is on entry-level and graduate roles, and that eroding that talent pipeline carries long-term risks for businesses.
"Where are those middle managers and higher managers going to come from?" he said in the podcast. "Where are they going to learn about the business?"
The chief scientist underscored that the most successful organisations will be those that use AI to support their people rather than simply reduce headcount.
"At the end of the day, the people who work for you are the most valuable thing you've got in your business, their knowledge, their expertise. That's the thing that you should be investing in," he said. "You should be investing in them becoming AI-capable, AI-literate people."
