Large corporations across the United States are cutting jobs. This is because the development of artificial intelligence (AI) can replace human roles, and the perception is spreading that large organizational sizes are becoming a 'stumbling block' to corporate growth.
According to the Wall Street Journal (WSJ) on the 18th (local time), Procter & Gamble (P&G), a global consumer goods corporation, announced that it plans to cut 7,000 jobs. This figure corresponds to 15% of the non-manufacturing sector workforce, and P&G explained that it is "a measure to create broader roles with smaller teams."
One of the largest cosmetics corporations in the world, Estée Lauder, and dating app operator Match Group recently laid off 20% of their management staff. Additionally, IT corporation Hewlett Packard Enterprise (HPE), which announced in March that it would lay off 3,000 employees, reported that its current workforce is the smallest it has been in the past decade, at 59,000.
Layoffs are common during economic downturns, but the recent reductions differ from the past, according to the WSJ. The WSJ noted, "Corporations usually cut employees during economic downturns and hire again when the economy recovers," adding, "However, the recent job reductions have occurred alongside surges in sales and profits."
U.S. corporations recorded unprecedented high operating profits last year. According to the St. Louis Federal Reserve Bank, as of the end of last year, the operating profits of U.S. corporations amounted to $4 trillion, which is more than double that of 2010. The share of corporate profits in last year's total national income reached 16.2%, about 3 percentage points higher than the average of 13.9% from 2010 to 2019.
One reason corporations are downsizing is the development of AI. According to the WSJ, AI has recently advanced to the level where it can replace human decision-making and complex tasks. For example, AI is handling tasks such as paying invoices or reallocating inventory when transport routes are blocked by natural disasters. Walmart has deployed AI agents to reduce clothing production timelines by up to 18 weeks.
Amazon Chief Executive Officer (CEO) Andy Jassy said in a memo to employees on the 17th that "some of the tasks that people are currently doing will require fewer people due to AI, and instead, there will be a need for people to perform new types of work," adding that "the efficiency gains from AI over the next few years could lead to a reduction in the overall administrative workforce."
With the development of AI, corporations are moving towards reducing their future hiring scales. Duolingo, a foreign language learning service provider, recently announced that it would gradually stop hiring contract workers to assign tasks that AI can handle, while e-commerce company Shopify has instructed its employees to explain why AI cannot perform the tasks when requesting new staff.
Moreover, the perception is spreading that smaller organizational sizes are more advantageous for corporate growth. The WSJ reported, "The belief is growing that having too many employees slows down company growth, and there is also a perception that those currently on payroll can work harder," indicating that "U.S. corporations believe they can grow faster with fewer employees."
Startups are no exception. Jolie, which sells high-end filtered showerheads, is expected to record about $50 million in annual sales this year with only five employees. Ryan Babjeian, CEO of Jolie, noted, "Hiring is no longer essential as it once was," adding, "Ten years ago, it would have been difficult to create a business generating $50 million with fewer than five people, but today it is quite commonplace."