Artificial intelligence is transforming the workplace in ways that go beyond simple job elimination—companies are strategically cutting positions while automating only specific tasks, leaving workers and policymakers grappling with an uncertain future for employment and skill requirements.
AI was cited as the top reason for job cuts in April for the second month in a row, according to the executive outplacement firm Challenger, Gray & Christmas. Yet experts and industry leaders describe a more complex reality: rather than wholesale replacement of workers, companies are using AI to handle discrete portions of jobs while restructuring roles around tasks that require human judgment.
More than 49,000 job cuts have been attributed to AI so far this year, according to Challenger, Gray & Christmas, with major technology companies leading the reductions. Block, the financial technology company behind Square and Cash App, laid off 40% of its staff this year because AI has allowed it to do more with smaller teams. Coinbase is reducing its staff by about 14% in part because AI is enabling engineers to "ship in days what used to take a team weeks," according to its CEO. Cloudflare reported that its AI use has increased by more than 600% in the last three months alone.
The Reality: Partial Automation, Not Replacement
Despite widespread anxiety, the picture emerging from industry analysis suggests a different trajectory than feared. Alexis Krivkovich, a senior partner at McKinsey & Company who leads the company's People and Organizational Performance Practice, said, "It's very few jobs that are actually entirely automated away by the current AI and robotics technology that's out there." While AI is technically capable of automating 57% of work-related activities, that percentage is distributed across "pieces and parts" of various jobs and responsibilities across an organization, Krivkovich explained.
Nitin Seth, cofounder of digital services and consulting firm Incedo, described how his company helps clients boost productivity using AI by at least 20% to 25% without reducing staff at the same scale because AI only handles certain parts of different roles. "You can't take one quarter of Lisa, one quarter of Jessica, one quarter of Nitin and one quarter of somebody else and make it one person," Seth said.
Microsoft's report, released about one week ago and based on surveys of 20,000 workers using AI across 10 countries, found that most companies haven't yet adjusted employee metrics and incentives to fit with how AI is changing work. Instead, many are grappling with which skills are needed from human workers. Microsoft noted in the report that "The anxiety around AI at work is real—from fears of job loss to the pressure to keep up with rapidly evolving technology."
Shifting Skills and Job Titles
The technology sector has been disrupted most acutely. Software engineers have increasingly embraced AI tools to help write code, with 90% of tech workers using AI in their jobs, according to a September survey from Google's research arm. Stack Overflow found that 84% of respondents either use AI tools in the software development process or plan to.
However, a software engineer's role encompasses far more than coding. It includes reviewing code, designing systems, troubleshooting problems, and deciding what to build. Boris Cherny, head of Claude Code at Anthropic, said in March, "I think by the end of the year, we're going to start to see the idea of software engineering go away." He suggested the term "builder" might be a more fitting title as the job expands and writing lines of code becomes a smaller part of it.
Sujata Sridharan, who most recently worked at fintech firm Bolt and has spent roughly a decade as a software engineer, said that although she uses AI, her work still requires problem solving and critical thinking. "With AI being used more and more, the skills that are actually required on the job have shifted to, are you able to recognize what is the right code quality? Are you able to problem solve?" Sridharan said. She noted that the difference is that execution now involves a mix of writing code and prompting AI.
Uncertainty Ahead
Dan Priest, PwC's US chief AI officer, said it's possible there will be "some job disruption on the horizon," but he said he isn't seeing mass layoffs at most companies and whole categories of jobs aren't currently at risk. Yet the trajectory remains uncertain as AI capabilities expand.
Anthropric announced within the past week new AI agents built for financial work, including building pitchbooks and crafting credit memos. Umesh Ramakrishnan, cofounder and chief strategy officer at executive search firm Kingsley Gate, captured the uncertainty: "It starts at the bottom, and it keeps going up. And I don't know where it stops."
Why This Matters:
The current wave of AI-driven job cuts reveals a critical gap between corporate decision-making and workforce planning. While companies cite productivity gains to justify staff reductions, workers face pressure to continuously reskill without clear institutional support or predictable pathways forward. The fact that most companies haven't adjusted employee metrics or incentive structures suggests workplaces are undergoing rapid transformation without adequate frameworks to protect workers or ensure equitable transitions. The concentration of AI adoption in technology sectors also raises questions about whether disruption will eventually spread to other industries, and whether current labor protections and social safety nets are equipped to handle large-scale workforce transitions. The anxiety workers report—documented in Microsoft's survey—reflects legitimate concerns about job security and the shifting expectations employers place on those who remain employed. Without proactive policy intervention and corporate accountability measures, AI-driven productivity gains risk accruing primarily to shareholders while workers bear the costs of constant adaptation and reduced employment security.