Tech company bosses often say that artificial intelligence will shorten our working hours, but so far, the actual manifestation of this claim is mainly the continuous decline in the number of employees working for them full-time.
Meta laid off hundreds of employees last week; Oracle is reportedly planning to lay off thousands to raise operating funds for its data centers; Atlassian laid off 10% of its workforce this month to refocus on its AI business through restructuring; and Block laid off 4,000 employees in February, approximately 40% of its total workforce. A report by career transition consulting firm Challenger, Gray, and Christmas shows that since 2023, artificial intelligence (AI) has been the reason for approximately 92,000 layoffs by US companies, with nearly two-thirds of these layoffs occurring in 2025.
However, this AI-driven wave of layoffs is not the doomsday scenario of "robots replacing human jobs" that people fear.
This is not because generative AI is advanced enough to replace all office jobs, but rather because tech companies are adjusting their investment strategies to try and stand out in the fierce competition of generative AI, which provides a seemingly reasonable excuse for their continued downsizing. Many companies will rehire existing employees or hire new people for similar positions after layoffs, and may seek more economical ways to perform the work. A survey conducted by consulting firm Robert Half at the end of 2025 showed that among 2,000 hiring managers, 29% said they reopened previously cut positions after implementing AI; 55% planned to increase the number of contract or temporary workers in the first half of 2026, and 60% said they intended to increase the number of full-time employees. A recent report by consulting firm Gartner predicts that by next year, half of the companies that laid off customer service staff due to artificial intelligence (AI) will consider rehiring employees for similar positions.
Kathy Ross, a senior director and analyst at Gartner, stated, "Most layoffs are not directly caused by AI. AI may have played a role, but layoffs are not a result of AI's success. Rather, these layoffs appear to be part of a broader strategy to reinvest funds in AI, hoping for future success."
Today, the massive investments by tech companies in AI may be coming at the expense of workers' rights and could fundamentally alter the labor market landscape, eroding what little loyalty remains between employees and employers.
For decades, the number of workers who work for companies but are not full-time employees has been steadily rising. A 2001 report by the U.S. Bureau of Labor Statistics estimated that temporary workers accounted for 4.3% of the total workforce in 1999; today, estimates using a broader definition of temporary workers show that this proportion has reached 40% of the U.S. workforce, and talent platform MBO Partners estimates that 73 million people are currently working as independent workers.
Since the inception of the tech industry, contract workers have almost always been a driving force behind its growth. In the 1990s, Microsoft employed contract workers, placing them in "permanent temporary" positions for years, creating a two-tiered system within its workforce. In 2000, Microsoft paid $97 million to settle a class-action lawsuit after contract workers claimed they were being overworked and deserved the same benefits as full-time employees. According to The New York Times, by 2019, Google had more temporary workers than full-time employees (Google did not respond to requests for comment on its current workforce composition). In the 2010s, with the rapid expansion of companies like Uber, Amazon, and Meta, they began employing contract workers in the US and overseas for often low-paying, physically demanding jobs such as driving, delivery, or content moderation. A recent study by freelance platform Upwork found that 77% of business leaders said the age of artificial intelligence is increasing their need for contract workers with specialized skills.
Those who once worked full-time at tech companies were beneficiaries of Silicon Valley's golden age, enjoying generous parental leave, high salaries, stock options, and perks like free lunches and dinners. Now, with companies laying off large numbers of employees and outsourcing some work to contractors, the employer-employee relationship is undergoing a profound transformation. Rob Larka, a professor at Tulane University's Freeman School of Business, says this is shifting Silicon Valley's culture "into a more 'masculine' direction, which, in Zuckerberg's words, is more assertive, more authoritarian, and is dominating in a way that is permeating company culture." David Weil, a professor of economics at Brandeis University, says this change is part of the tech industry's long-standing attempt to "reduce the number of people who need to build long-term relationships through traditional employment relationships." "This is just part of a larger game amplified by AI," he says. "Profitable organizations want to share as little profit as possible with the people who create the most value."
A few years ago, a Microsoft employee who was laid off experienced this change firsthand. His name has not been released as he has since returned to Microsoft. He stated that while the company didn't explicitly mention artificial intelligence as the reason for the layoffs, its intention to fully commit to AI was obvious. The end of his full-time job also meant the loss of all his unvested stock options. He told me that shortly afterward, a third-party contracting company contacted him, hoping he would join the same team, as they were rehiring contract workers. This employee said he declined the offer, and after a year of job hunting, he finally received a full-time job offer—returning to Microsoft, but in a lower position with a salary reduction of about a third. He said he felt he had "no choice" and accepted the job, and remains employed to this day. "My morale has been severely damaged." Microsoft is laying off 15,000 people in 2025, a figure the company declined to comment on.
Some companies, while laying off employees, still maintain dozens of job postings on their official websites, or quickly rehire employees after the layoffs. At Block, at least one still-employed employee said the company offered her a retention package that increased her salary by tens of thousands of dollars, and some laid-off employees were rehired. Klarna CEO Sebastian Siemiatkowski has drastically reduced its workforce, cutting the company's headcount in half through layoffs, attrition, and a continued hiring freeze. The company uses an AI assistant for day-to-day customer support while also hiring contractors for tasks that AI cannot handle. Siemiatkowski announced last year that Klarna was building an "Uber-like model," recruiting customers as gig workers to answer more complex questions. "They can actually join Klarna's customer service team," he said on the podcast "20VC." He added, "These are our most loyal customers. Now they can earn extra income by participating in our customer service work." Klarna did not respond to questions about the size of its customer service contract workforce.
The idealistic vision of earning extra income by handling angry customer complaints or "being your own boss" by taking on contract work isn't for everyone. Contract workers often miss out on benefits enjoyed by full-time employees, such as health insurance, 401(k) retirement plans, unemployment insurance, stock options, and job security; they also face greater difficulty in protecting their legal rights if they experience sexual harassment or discrimination. While some contract workers do enjoy flexible working hours, the continued prevalence of this model could further exacerbate the unequal distribution of retirement and healthcare benefits. “They try to mislead us, talking about how great flexible employment is, how we can work autonomously, and how we can gain experience by switching jobs,” says Maureen Willie Clough, who hosts a podcast called “It Gets Late Early” that discusses workplace aging. “But the reality is, companies are hiring more contract workers and reducing full-time employees because it makes them more money.”
Massive investments in artificial intelligence are creating a new industry structure: one group of employees is highly valued for their AI expertise, while another group constantly fears being sidelined. This summer, Meta reportedly offered hundreds of millions of dollars in compensation to recruit top AI talent. My colleague Pranav Dixit and I reported at the time that a winner-takes-all era was dawning. Recently, Meta conducted layoffs and restructured its Reality Labs team, assigning employees to AI-native groups. These moves indicate that the company continues to focus on AI-first and smaller, more agile teams. A Meta spokesperson told me that the company regularly restructures teams to “ensure they are in the best position to achieve their goals,” and that it is looking for “other opportunities” for employees “potentially affected” by the recent layoffs.
Today, those with jobs are struggling to keep them, as people across industries are finding it difficult to find suitable work, let alone ideal jobs that help them increase their net worth and advance their careers. As my colleague Aki Itō reported, pay cuts have become the norm. According to research from Revelio Labs, by the end of 2025, 40% of white-collar job-hoppers accepted pay cuts of 10% or more, the highest percentage in a decade. Meanwhile, the number of employees switching jobs for pay cuts of 10% or more has dropped significantly.
Kathy Ross points out that rapid layoffs can backfire. It can lead to damage to company reputation, loss of institutional knowledge, and decreased productivity due to team restructuring. The unrealized productivity gains from artificial intelligence may further exacerbate these losses: a study released last year by MIT found that 95% of AI pilot projects did not result in increased productivity or cost savings; research from UC Berkeley also indicates that AI is increasing workload rather than reducing the need for human labor. If tech companies continue to worsen employment relations, whether through dizzying speeds of layoffs or a shift to outsourcing, they will threaten already fragile labor relations.
