Amazon’s “Transformative” AI Approach Lays Off Over 14,000 Employees

AI implementation is causing large numbers of corporate layoffs and organizational downsizing. Photo courtesy of Lara Jameson via Pexels

Over 14,000 corporate employees are set to be laid off in accordance with Amazon’s new “nimble” organizational structure.

Amazon Senior Vice President Beth Galetti announced the layoffs in a statement on Oct. 28. She claimed that with the effects of Artificial Intelligence, Amazon is innovating faster than ever. In order to drive their level of innovation and results, the e-commerce giant believes they need to be organized “more leanly, with fewer layers and more ownership.”

This isn’t the first time Amazon’s senior executives have publicly discussed AI use. This past June, Amazon CEO Andy Jassy released a statement where he exemplified how the technology has been an asset to the company.

Jassy’s sentiment was that AI agents would transform Amazon’s operational efficiency drastically. Agents allow you to tell them what you want in neutral language, and then are able to perform a range of tasks from analyzing data to writing code. 

This would shift Amazon’s focus from tedious, mechanical tasks to more strategic and creative ones. It also means that the company requires fewer people doing the jobs being done today, and more people in other job areas. Jassy was unsure where this nets out over time. 

Amazon isn’t the only company downsizing. According to an article by NBC News, Target, Meta Platforms and Microsoft are cutting over 11,000 jobs combined, while Goldman Sachs CEO David Solomon alluded to “constraining headcounts.” 

While companies like Amazon point to AI as the underlying cause for the growing number of layoffs, other close followers of the economy aren’t convinced that downsizing is linked to AI alone.

Guest speaker at Marist University, CEO of Clinton Investment Management, Andrew Clinton, discussed how factors like inflation and pricing power lead to job cuts. As inflation comes down, so does a company’s ability to raise prices while still making a profit.

“AI is an excuse. You don’t want to say you’re laying off employees to save your largest expense,” said Clinton.

U.S. inflation rates, after a steady rise that jumped up to 7% in 2021, happen to be on a downward trend, dropping to about 3% by 2025.

This claim is amplified by recent reports from MIT that claim that 95% of generative AI pilots deliver zero return on investment, a claim contradictory to those in Amazon’s public statements. Clinton explained that implementing AI is a massive cost for businesses, one that we are unlikely to see a return on until much further in the future. This raises questions of the opportunity cost of AI integration.
Overall, what does the development of Generative AI mean for unemployment?

Goldman Sachs’ primary hypothesis is that there could be a period of higher unemployment while AI-displaced workers search for new jobs. This is particularly in fields where AI is substituting for large portions of labor, like marketing, consulting, graphic design, computer systems and software publishing. 

Simultaneously, the financial institution isn’t convinced that AI will eradicate the workforce. New jobs will emerge from technological development. 

“Frictional unemployment is not unique to AI and occurs during most periods of technological change,” said GS economists Joseph Briggs and Sarah Dong. 
In the meantime, corporations like Amazon are doing what they can to support their team during their period of downsizing. The company is offering most employees 90 days to look for a new role internally, and their recruiting teams are prioritizing internal candidates as much as possible.