The Reason Generative AI Is Reducing Companies' Hiring Expectations

AI may not be leading to noticeable layoffs yet, but it is already affecting corporate hiring.

The expectation of productivity and efficiency gains from use of generative AI is changing the way companies are thinking about their hiring needs, reducing expectations for future employee head counts. This will have a cascading impact on real estate and related costs which could boost profits - but also boost unemployment and demand for social services. JL   

Isabelle Bousquette reports in the Wall Street Journal:

Generative AI is reshaping hiring at many companies as the technology will pay off if it helps them employ fewer people to do more work. If Gen AI makes workers more efficient, companies will save money by doing more with smaller workforces. While using generative AI doesn’t necessarily portend layoffs, (it) hints at the need for companies to hire less. The IT job market is expected to shrink, driven in part by declining demand for non-AI skills.  A tool determines the cost efficiency of each AI model, based on parameters such as the number of requests and the length of inputs and outputs. It also helps determine whether it is more cost effective to stick with a traditional process.

Generative AI is reshaping the conversation around hiring at many companies as they realize that one way the pricey technology will pay off is if it helps them employ fewer people to do more work. 

While early wins from using generative AI don’t necessarily portend future layoffs, they hint at the need for companies to hire less, chief information officers say. This observation comes as business technology leaders seek returns for their increased spending on AI. 

“We’re looking at a lot of interesting tools and they have a lot of promise—but then when you look at the cost of the tool you say, ‘Am I really going to realize that productivity internally or am I just going to increase my technology cost?’” said KeyBank CIO Amy Brady.

 

Brady said she sees AI playing a role in workforce size to the extent that if it does make workers more efficient, companies will ultimately save money by doing more with smaller workforces. 

KeyBank deployed a conversational AI tool that is helping reduce the volume of calls coming to the customer service contact center, said Brady. “We probably hired less because we have less call volume,” she said. 

Anupam Khare, senior vice president and CIO of specialty vehicle maker Oshkosh Corp., also sees generative AI changing the workforce conversation, with employee productivity gains reducing the need to hire, even in the case of backfilling as people are promoted up in the organization.

“Three years ago we were a $7 billion company and now we are a $10 billion company—much larger, but our number of people are not increasing in that proportion,” said Khare, who added that Oshkosh has identified 40 potential generative AI use cases and already has a couple in pilot, including code generation.

It is too early to see expectations of reduced hiring materialize nationally. U.S. job growth has remained strong, with employers adding a seasonally adjusted 303,000 jobs in March, more than the 200,000 economists expected. Separately the IT job market is expected to shrink, driven in part by declining demand for non-AI skills. 

 

At insurance company Nationwide Chief Technology Officer Jim Fowler has guided the creation of a tool that analyzes the cost of a given generative AI use case across several different available proprietary large language models. 

The tool has been helpful, he said, in determining the cost efficiency of each AI model, based on parameters such as the number of requests and the length of inputs and outputs. It has also helped Nationwide determine whether it was more cost effective to stick with a traditional process. For example, in its property and casualty business, Fowler said the company decided not to move forward with a use case that looked for answers on specific customer questions related to claims. 

But even those results didn’t sway him from a belief that the company will be able to grow without having to hire proportionally more clerical workers. 

“Our goal is really to allow our associates to do the higher-order thinking work and to take the clerical work away so that we don’t have to add more people as the company grows,” Fowler said.