IBM To Stop Hiring For Roles That Can Be Replaced By AI; Nearly 8,000 Workers To Be Replaced By Automation

A month ago there was much disappointment and

widespread denial

Goldman predicted AI could lead to

Some 300 million layoffs of highly-paid, non-menial employees

In the US and Europe. Goldman Chief economist Jan Hatzius stated, "using data from occupational tasks in the US and Europe."

We find that two-thirds or more of the current workforce is at risk of being automated by AI, and that generative AI can replace up to a quarter of existing work.

Our estimates suggest that the equivalent of 300,000,000 full-time positions could be affected by automation.

AI could automate up to two-thirds of occupations.

Goldman's prediction was met with emotions from disbelief to mockery. However, it might not have been that far off.

Just last week was a good example.

Dropbox

It would be laying off 16%, or 500 employees. This is because the company was trying to expand its AI division. Dropbox CEO Drew Houston wrote in a memo that, 'in an optimal world, we would simply move people from one team into another'. We've done this wherever we could. Our next stage of expansion will require a new mix of skills, especially in AI and early product development. Over the past couple of years, we have been bringing on great talent to these areas. We will need more.

Houston says that the changes announced today are painful but necessary for our future. I'm determined that Dropbox will be at the forefront in the AI era just as we have been at the front of the mobile and cloud shift. Machine intelligence will give us the ability to reinvent our businesses and create new ones. We'll all need to be on board.

While the layoffs at Dropbox were meant to create space for AI-related hires, IBM's AI is actually making employees redundant.

Bloomberg reported that IBM CEO Arvind Krsna said the company would pause hiring in roles they believe could be replaced by artificial intelligence over the next few years. Krishna stated in an interview that the hiring of back-office staff -- including human resources -- would be suspended or slowed. Krishna stated that these roles do not involve any customer-facing interaction.

I could see AI and automation replacing 30% of those jobs over the next five years.

This would result in the loss of approximately 7,800 jobs.

IBM's spokesperson stated that a reduction in staff would also include the removal of roles due to attrition.

Krishna's plan is one of the most significant workforce strategies announced to respond to rapidly evolving technology. It won't be last, as IBM and virtually all other companies will follow suit in the next few years by laying off tens of millions if not even hundreds of millions workers.

Krishna stated that mundane tasks, such as sending employment verification letters and moving employees from one department to another, will be automated. While some HR functions such as evaluating the workforce composition and productivity are unlikely to be replaced in the next decade it's only a question of time until AI replaces these roles.

IBM employs approximately 260,000 people and continues to recruit for roles in software development and customer service. Krishna stated that it is easier to find talent today than it was a year earlier. The company announced earlier this year that it would be cutting 5,000 jobs. Krishna says that IBM has still added to its overall workforce, adding about 7,000 new employees in the first three months.

IBM, based in Armonk, New York, beat its profit expectations for the most recent quarter thanks to better expense management and job cuts announced earlier. IBM used to be able to manipulate its stock price by buying back billions of shares (at higher prices) in the past. Once its debts became too large, the stock buybacks stopped, Warren Buffett sold shares and the stock has been stagnant for more than half a century. Since the company's revenues are stagnant, it is only left with a drastic reduction in overhead.

On the day earnings were announced, Chief Financial Office James Kavanaugh stated that AI would be the key to achieving $2 billion in annual savings.

The coming recession will help the company in its imminent transition into an AI-staffed corporate. Krishna believed that the US would avoid a recession until late 2022. He sees the possibility of a "shallow" and "short" recession towards the end this year. However, it is unclear how one can determine if a recession is "shallow".