Will AI Substitution Really Cut Jobs? Maybe Not

Artificial intelligence cost savings and job cuts are a tricky matter. Consider claims that AI allowed IBM to cut between 3500 and 8000 jobs by using AI. In fact, job losses might have been in the “hundreds,” not thousands.  

It is argued that IBM then redeployed its resources from AI automation to hire new talent for high-growth areas like software engineering, sales, and marketing. Headcount might have actually grown, as a result. 

The other issue is that some job “losses” were related to the prior company spinoff of Kendryl, the managed services business with 90,000 employees, about 25 percent of IBM’s total workforce. 

That led to later job cuts at both Kendryl and IBM. 

The point is that it is hard to quantify how AI affects jobs. There could be a combination of cuts as well as new jobs created. There will be some displacement of existing human jobs as automation creates substitutes.

Also, there are other effects. New technology gets used because it boosts productivity. If that lowers the cost of producing goods and services, lower prices happen, increasing consumer demand. 

The increased demand often requires more production, which can offset initial job losses by increasing demand for labor in other parts of the value chain or other growing sectors of the economy.

For example, the introduction of the Model T made cars cheaper, increasing demand for cars, which ultimately required more, not fewer, auto workers.

In addition, technology doesn't just automate old tasks. It creates entirely new ones that only humans can perform, particularly those involving non-routine cognitive, creative, and social skills (managing the new technology, developing software, data analysis, ethical oversight, or personalized services). 

That can lead to the formation of whole new industries and occupations that did not exist before.

Historically, this pattern has played out repeatedly, from the Industrial Revolution (replacement of artisans with factory workers and creating engineering/maintenance roles) to the information technology revolution (eliminating typists and switchboard operators while creating software developers, network administrators, and digital content creators). 

Artificial Intelligence automation should have the same net positive impact on jobs. That said, the immediate focus often will be on "lost jobs."

Over the past six years, IBM has continuously refined their internal virtual agent, AskHR, to automate more than 80 HR tasks and handle over 2.1 million employee conversations annually. Most recently, in 2025, the team integrated IBM watsonx Orchestrate.  

The AI agent helped contribute to a 40-percent reduction in the HR team’s operational costs over the past four years, IBM says. AskHR also achieved a 94 percent containment rate of common questions, has led to a 75 percent reduction in support tickets raised since 2016, and has created more than 10 million employee interactions each year since 2023.

That might suggest that AI will only work in one direction: substituting itself for existing jobs. That will happen, but is only part of the story.

The point is that AI might often not be a zero-sum game, where AI only destroys jobs. It should also create the need for new jobs.