Concerns over AI’s impact on the job market have reached a fever pitch. Major companies like Oracle, Amazon and Salesforce have cut large segments of their workforce to make room for an automated workforce.

And if the AI companies involved in this upheaval are correct, the economic projections are staggering. Anthropic predicts scenarios where AI boosts the U.S. economy 15% by 2030, while unemployment among many white-collar workers hits 18%. 

Workers who use AI frequently are more than twice as likely to fear job elimination within five years compared to those who use AI only a few times a month or year, according to a recent survey by research firm Gallup.

Yet executives driving mass layoffs to pivot towards AI may be moving too fast, according to new research from Gartner. The consulting firm predicts that by 2029, 30% of employees laid off due to replacement by AI will need to be rehired, likely at a significantly higher cost.

“Agentic AI is not taking over a significant enough portion of work for an organization of any size to be successful with laying off a considerable amount of workers,” Tori Paulman, VP Analyst at Gartner, told Channel Dive. “AI productivity, meaning the everyday AI tools that you use to do your regular job, are not driving outsized productivity. That is represented in basically every Gartner report and every external report, as well.”

Paulman’s team analyzed over 1 million layoffs occurring in 2025, and found that employee cuts related to AI productivity — meaning AI made a single worker so much more productive that an organization needed fewer employees — represented less than 1% of total layoffs. In the second half of 2025, AI-related firings actually decreased rather than increased, according to Paulman.

Gartner also found that 17% of AI-attributed layoffs in the first half of 2025 were commercial pivots, meaning companies repositioned their workforce from unprofitable units to new AI product lines. Paulman said these companies were likely “AI-washing” by using AI as cover for standard business restructuring.

“Our interest was piqued when we began to see all these headlines about layoffs, but we perceived at the time that they seemed to be coming from high-tech companies that also were selling AI products,” Paulman said. “We were like, wait a minute, what's really going on here? Is this coming from organizations that are selling products that purport to deliver productivity —  and therefore want to send the signal they're eating the dog food also?” 

The replacement flop

AI-driven talent strategies have backfired for some organizations, particularly those that cut people-oriented job functions like customer service.

In 2024, Klarna replaced 700 of its customer service agents with AI workers — by early 2026, the company had begun hiring humans back. Companies like Ford, IBM and the Commonwealth Bank of Australia have also walked back on AI-related layoffs and reemployed engineers, human resources reps and customer service staff, according to reporting from CNBC.

“Customers just don't really like talking with AI, particularly over voice,” Paulman said.

These rehiring incidents are happening as world demographics fall out of balance. Combined with a declining global labor force driven by baby boomer retirements and shrinking birth rates, mass layoffs tied to AI could lead to a future of talent scarcity, according to Paulman. And high competition for hiring means it will cost companies more to bring employees back.

Paulman added that many business leaders working with Gartner lack a basic understanding of AI fundamentals, while being pressured to find cost savings and revenue growth using AI. 

“Executives are being steeped in an environment of what I would call magical thinking: that AI will just figure it out,” Paulman said. “And then you have limited knowledge of disciplines like data and analytics, machine learning and automation. That’s a recipe for a misalignment in strategic priority.”

As companies push AI implementation unilaterally, many employees across the corporate hierarchy just aren’t seeing productivity boosts tied to measurable business outcomes. 

Less than half of organizations say AI is essential to their core work, according to a study of more than 1,500 decision-makers by software company Aptean. Even among organizations seeing gains, the results are underwhelming. Less than a quarter of 6,000 C-suite executives and non-C-suite employees seeing positive productivity gains saw reportable business value, per Accenture’s Pulse of Change report.

“Major tech companies are suffering from the exact same challenges that the average end-user client is suffering from: low employee adoption, unclear productivity value and magical thinking from the executive team,” Paulman said. 

The executive knowledge gap

One of the biggest mistakes that executives make is thinking AI is equivalent to humans, Paulman said. This prevents them from thinking critically about where AI should be applied and choosing the right AI discipline — LLMs or automation, for example —  for specific problems.

The most effective organizations will resist the temptation to automate every task and delegate every decision to AI, according to Gartner.

Gartner recommends executives shift their thinking about AI to more effectively navigate workforce transformation. First, AI should act as a “toolmate” that enhances human capabilities rather than replacing them. Organizations should also invest in AI literacy and emphasize human context, judgment and institutional knowledge alongside AI adoption. 

Discernment is essential to using AI effectively, Paulman said.

“It is the job of the user of the tool, the builder of the models and also the executive to use this technology in a verifiable, correct way,” Paulman said, “It is also their responsibility to use it in a way that is useful. When I present on AI, I tell the audience, which generally is IT professionals, that I think it's their job to go out and talk to their community members, their parents, their kids about AI. It’s essential to be plain-spoken and bring people along in this transition, because this is just too dramatic of a shift in terms of what we think of as human."

Organizations that get this right are primed to build workforces that use AI to amplify human strengths, while avoiding costly firing and rehiring. In a world where technology is balanced by human intervention and talent, AI can empower users rather than invoke fear, Paulman said.