What is ‘AI washing’ and why do companies do it?

In what is an emerging concern worldwide, companies are increasingly being accused of ‘AI washing’ – falsely attributing mass job layoffs to the implementation of AI rather than underlying geopolitical, economic or financial factors. Several global firms, including Amazon, Hewlett-Packard and Pinterest, have recently linked large-scale layoffs to AI, but emerging research has cast doubt on these claims. Market research firm Forrester believes only 6% of US jobs will be automated by 2030, arguing that most companies simply don’t have access to sufficient AI capabilities to replace such a large number of employees.

Large companies likely engage in ‘AI washing’ because it’s a “very investor-friendly message” when executives are asked to justify mass redundancies. Simply put, investors prefer hearing that job cuts are due to improvements in efficiency, compared to underlying financial struggles or poor executive decision making. Furthermore, some US companies may fear attributing business struggles to policies such as President Trump’s tariffs, thus AI acts as an effective scapegoat that avoids irritating the government.  

A lack of productivity growth may be one of the biggest indicators that AI is not replacing as many jobs as we are led to believe. This is in part due to firms also reducing headcounts in anticipation of a future AI benefit, even if that benefit cannot be realised in the short term. For example, Telstra’s recent announcement of 650 redundancies reflects expectations of future AI integration, but after making a similar announcement last year, CBA was forced to rapidly rehire staff. Consequently, firms may be expected to provide greater detail when using AI adoption as justification for future mass-layoffs.

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