Companies are cutting jobs and blaming AI. This is why that's a problem for everyone
What happens when efficiency for the company turns into friction everywhere else?
I posted something recently on Instagram about AI, cost cutting and corporate decision-making. I didn’t think it was anything particularly controversial - until the comments started.
My argument was that companies looking for ways to reduce overhead in a tighter economy should consider options such as flexible work for eligible staff, which has been demonstrated to deliver savings of up to $11,000 per worker annually through reduced overheads and real estate costs. What’s more, these options should be considered and tested before mass layoffs are rolled out as part of doing business ethically and sustainably.
(I also think companies should be made to demonstrate they’ve done everything they can to manage costs before cutting staff en masse, but I know that’s never going to happen.)
I found myself getting involved in a bit of back and forth with one person who took it upon himself to explain to me, in some detail, that payroll is the biggest cost for most companies, so of course companies cut people first. Most importantly, he really wanted me to know that if AI allows you to do more with fewer people, it’s a cost lever that should be pulled immediately.
His position was that it’s simply how businesses need to operate, especially listed ones, because that’s what fiduciary duty requires. And to be fair, none of that is wrong. I work on investor reporting and communications, so I know and understand that logic from inside the company. Your number one focus needs to be reducing costs and maximising profits to deliver to your shareholders. That means reallocating capital when it’s required and investing where the returns look stronger.
You can defend every step of that. What’s there to argue with, really?
What I’d like to argue with here
Mansplaining aside, it took me a little while to work out why I was so bothered with what he was saying. It wasn’t the logic, it was the boundary of the argument. The “shareholder value always comes first” argument only works if you treat the company as a closed system, and that is simply never the case.
Companies draw on shared infrastructure all the time. They benefit from public roads, energy systems, communications networks, regulatory stability and education systems that produce skilled workers. None of that sits on the balance sheet in the same way payroll does, but it’s foundational to how businesses operate.
When things are going well, the returns are clear. Company revenue increases without having to pull too many cost efficiency levers, which means more profits and benefits to shareholders.
Friction appears when the economy is tighter, like we’re experiencing right now. When decisions are made to reduce cost, the impact doesn’t stay neatly inside the organisation.
People lose income, which means households adjust spending. Communities absorb the change and governments pick up second-order effects through support systems and reduced economic activity.
Of course, no single company is responsible for that entire chain. However, they all contribute to it in some way, and it still exists. If multiple companies are trying to optimise at once to protect themselves, everyone carries the burden of that.
What gets measured, what gets absorbed
We have a system that measures and rewards financial outcomes very precisely, and treats everything else as secondary. Workforce impact is acknowledged, sometimes reported, but rarely carries the same weight in decision-making.
Decisions that are rational at the company level can produce outcomes that feel increasingly uneven at the system level. You can see it more clearly right now because of how those decisions are playing out.
It’s harder to ignore when those decisions aren’t even driven by acute cost pressures. We’re seeing companies that are delivering strong results and still reducing their workforce at scale. Oracle is one example.
Those moves are often framed as strategic. In Oracle’s case, they are cutting workers to redirect investment toward areas like AI and infrastructure. The forward story makes sense for the company. However, what’s missing from that story is the fact that these outcomes don’t happen in isolation, and the company’s current success has only been possible because of the support of the shared systems, resources and infrastructure that underpins growth - even if that’s not directly accounted for in financial reporting.
When decisions are made to reduce workforce at scale, the impact extends beyond the organisation, while the gains remain tightly held.
AI is accelerating the pattern
Right now, AI is increasing the perceived replaceability of labour. It strengthens the case for structural cost reduction and then allows those decisions to be executed faster and at greater scale.
The logic might be easier to apply, but the consequences don’t become easier to absorb. Far from it.
None of this means companies are acting irrationally. In many cases, they are doing exactly what the system asks them to do. And that is my point in a nutshell.
When every company optimises for its own position, using the same set of incentives, the effects accumulate across the system. They don’t remain within the firm. We’re starting to feel that accumulation right now, and it’s going to get worse before it gets better.
That gap has always existed to some extent. What’s changing now is the speed and scale at which it’s playing out. AI is making it easier to reduce labour, while market pressure is making it easier to justify.
Meanwhile, the systems that absorb the impact (households, communities, governments) don’t move at the same pace so the imbalance becomes more visible.
Where to from here
This isn’t about asking companies to act against their own interests. It’s about recognising that the current definition of those interests is incomplete. If companies rely on shared systems to grow, then the consequences of their decisions can’t sit entirely outside those systems. Right now, that’s exactly what happens.
Until that changes, we’re going to keep seeing the same pattern repeat: rational decisions inside the business, uneven outcomes everywhere else.