Layoffs
A troubling corporate strategy is sweeping through Silicon Valley as tech firms weaponize AI as an excuse to downsize Pexels

A prominent MIT economist has raised the alarm over a troubling new strategy sweeping through major Silicon Valley firms this season. Industry experts warn that executive boards are deliberately shifting the public narrative, fundamentally changing how mass redundancies are presented to the market.

By re-framing painful corporate downsizing as forward-thinking technological evolution, leadership teams hope to protect their stock prices while quietly reshaping the future of the global tech workforce.

The Flatter Corporate Narrative

Wix became the latest technology firm to pin its recent redundancies on artificial intelligence late last week. According to an industry expert, this pattern exposes an uncomfortable reality that corporate leaders have desperately tried to hide for years.

Writing on X, Wix CEO Avishai Abrahami announced that the Israel-based website builder will slash roughly 20% of its workforce. This equates to just over 1,000 redundancies, calculated from a Securities and Exchange Commission filing in May, which listed the firm's total headcount at 5,277.

In the X post, Abrahami highlighted the financial strain caused by the rising value of the Israeli Shekel against the US Dollar. However, he also blamed AI, stating the business must evolve to keep pace with changing times.

Abrahami described AI as 'the most significant shift in how companies are built since the invention of modern programming languages in the 1970s'. He further explained that Wix had to evolve in order 'to become a faster, leaner, and flatter organisation.'

This phrasing directly mirrors the rhetoric of Block CEO Jack Dorsey, who opened the year by cutting 4,000 roles in pursuit of 'smaller and flatter' teams and a 'new way of working'. It is a corporate narrative that has found equal favour with leadership teams at Snap and Atlassian, who have deployed remarkably similar justifications for their own downsizing.

The Shrinking Global Workforce

This drive toward smaller teams and greater output per employee is hardly a new phenomenon. 'They've been saying that for 20 years,' notes Paul Osterman, a professor emeritus of human resources management at the MIT Sloan School of Management and author of 'Disposable Workers: The Transformation of Employment.'

According to Osterman, the real shift is that some firms are now quietly admitting what they used to hide: they simply do not want a larger workforce.

Exposing the AI Washing Trend

Though AI certainly forces businesses to modernise and restructure, Osterman believes most firms are simply using the technology to mask standard redundancies. This tactic, known as 'AI washing,' lets corporate leaders reframe traditionally bleak financial news as a proactive leap in innovation. Sometimes the gamble pays off, as seen earlier this month when Cisco cut 4,000 roles and watched its share price surge by 13%.

'AI is a perfect excuse to justify big layoffs,' Osterman told Fortune. 'It makes it seem as if it's not our decision, our fault—it's the technology.' He noted that firms behave similarly during economic downturns, using recessions as a convenient cover story to dismiss staff they intended to let go of anyway.

Rise of the Disposable Worker

Concurrently, this sudden wave of AI-related redundancies may also tie into the growing pool of 'disposable workers,' a group Osterman estimates now accounts for 35% of the American workforce.

Employers often prefer these contingent staff—including contractors, freelancers, and gig workers—because they advance corporate goals while remaining entirely expendable. Relying on this workforce slashes company spending on employee benefits and provides the agility to scale headcount up or down as market conditions shift, a flexibility corporate leaders view as vital as AI fundamentally reshapes the nature of work.

The Bureau of Labor Statistics last tallied these figures in 2023, counting 6.9 million contingent workers—such as contractors and temporary staff—who accounted for 4.3% of the US workforce. While that remains a conservative baseline, it marks a clear rise from 2017, when this segment sat at just 3.8%.

Kicking Trends Into Overdrive

While this shift toward disposable workers has been quietly building for decades, Osterman argues that AI-driven uncertainty is now kicking the trend into overdrive. Yet Osterman's research reveals a clear downside: contractors and contingent workers earn less and report lower job satisfaction than their full-time peers.

Unsurprisingly, this creates a transactional dynamic, leaving these workers far less willing to go the extra mile for employers who view them as entirely expendable. It's a grim outlook, but Osterman doesn't believe workers should just accept a precarious future as the inevitable new normal.

'We created a stable employment system of high wages and shared prosperity in the past,' he said. 'That's what we should be thinking about doing now.'

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