There have recently been several high-profile cases of companies announcing that they were laying off employees because of AI. A common response to these cases has been to treat them as direct indications of the effect of AI on the economy, and even to tally them up to measure total job loss due to AI.
However, company reports of AI-driven job loss are a pretty bad proxy for the actual effect of AI on employment, for four main reasons:
1. Self-reporting is unreliable. Companies have incentives to both over- and under-report AI-driven layoffs, so self-reported figures of AI-driven layoffs shouldn’t be taken at face value.
2. Job losses don’t capture the net effect within a company. Even if self-reports were reliable, they miss new job creation and changes in hiring (including hiring slowdowns due to reduced labor demand).
3. AI adoption in one company can affect jobs in other companies. Even if you could accurately measure the net effect of AI adoption on jobs within a company, changes in one company’s productivity can affect employment at other companies, such as when an early adopter outcompetes a rival and forces them to downsize.
4. AI can create entirely new jobs and businesses. New firms and roles can emerge, which are not captured in data from existing companies.
