What Amazon’s 14 000 job cuts say about a new era of corporate downsizing

Amazon is culling roughly 14 000 positions from its corporate workforce, becoming the latest business giant to tout thinner ranks and flattened hierarchies, and lean into innovations unleashed by artificial intelligence.

The long-telegraphed layoffs will “remove layers, increase ownership, and realize efficiency gains,” with the stated aim of running the company “like the world’s largest startup,” according to a Tuesday blog post by Beth Galetti, Amazon’s senior vice president of people experience and technology.

Amazon employed 1.56 million people, including corporate and warehouse workers, at the end of last year. (Amazon founder Jeff Bezos owns The Washington Post.)

It joins big companies such as Salesforce, Microsoft and UPS in making sweeping cuts to their workforces - many doing so despite strong financial performance - while prophesising about AI’s potential to let them innovate and grow profits. The string of cutbacks is dovetailing with the government shutdown, leading to a dearth of data as economists and policymakers are watching keenly for signs that slower hiring, rising unemployment and creeping inflation are weighing on the economy.

John Challenger, the CEO of the consultancy Challenger, Gray and Christmas, said the rash of recent cuts from big companies suggests that the “don’t hire, don’t fire” labour market of recent months is giving way to “a restructuring in the economy” as companies try “to be at the front edge of bringing AI into the way they work.”

“It does portend others will jump on the bandwagon” as companies lean into the narrative that “this is a time of change,” Challenger said.

Layoffs will help ensure the company is investing in “what matters most to our customers’ current and future needs,” Galetti said in the post. She didn’t specify which teams would be affected or which regions, but she said employees were being notified. Those affected would be given 90 days to search for a new role internally, and internal candidates would be prioritised during the hiring process, she said.

Still, the scale of layoffs remains well below 2023’s historic surge. Through October, companies have shed roughly 98 000 jobs across about 115 publicly reported rounds of cuts. But those layoffs are hitting more workers at once: an average of more than 850 employees per cut, the highest level in at least five years, driven in part by steep reductions at major hardware firms such as Intel.

Amazon’s layoff announcement comes days before the company is scheduled to report its earnings, but CEO Andy Jassy had warned employees in June that cuts were coming, attributing the reductions to efficiencies created by the company’s use of AI. He later said he planned to reduce bureaucracy by getting rid of some layers of management and “unnecessary processes” that were slowing the company.

Challenger pointed to Amazon’s framing of the reductions as part of its effort to remain at the vanguard, a way of saying: “We’re cutting-edge technology and we have to be there.”

“It’s almost like they’re the leader,” he added.

Some executives have echoed Jassy’s talking points in announcing their own layoffs, forecasting big gains from AI that will streamline their operations. Walmart has said it plans to keep its head count flat at a little more than 2 million workers for the coming years while it transforms its workforce for the AI age.

While reporting blockbuster earnings Tuesday, UPS acknowledged it had cut roughly 34,000 operational positions so far this year, along with 14,000 management positions. Chief executive Carol Tomé told investors and analysts that the company is “positioned to run the most efficient peak in our history.”

“We keep finding opportunities for us to bring costs down,” Tomé said.

These trends in workforce management point to a challenging future for workers who are deemed redundant or behind the curve, Challenger said. Long-term unemployment numbers have been creeping up throughout the year, “which is usually a sign that people are being left out.”

“People whose skills are not up-to-date become more obsolete,” he added. “You see this segment of people get stuck, and it’s hard to get out.”

Accenture pointed directly to AI when it laid off 11 000 workers in September, with CEO Julie Sweet telling investors in an earnings call that those cut could not be retrained for an AI-driven workforce. Unlike many others, Accenture does still plan to grow its headcount in the upcoming year, Sweet said.

In a memo earlier this month, Goldman Sachs warned that employees should expect additional job cuts despite its soaring profits, as the bank trims costs and integrates AI into operations.

“It’s become increasingly clear that our operational efficiency goals need to reflect the gains that will come from these transformational technologies,” said the memo, according to reporting from Bloomberg News.

German aviation giant Lufthansa Group said in September that it would cut 4 000 roles by 2030, as it reviews “which activities will no longer be necessary in the future,” noting that “profound changes brought about by digitalization and the increased use of artificial intelligence will lead to greater efficiency in many areas and processes.”

Salesforce also slashed its ranks by roughly 4 000 in September, with CEO Marc Benioff saying he “needs less heads” in an interview on “The Logan Bartlett Show” podcast. Over the summer, Benioff said AI was doing 50 percent of the work at the company.

“If people are getting more productive, you don’t need to hire more people,” Airbnb CEO Brian Chesky told the Wall Street Journal in an article published this week. The company is planning little hiring for the near future, he said, with the hope that AI allows existing team members to “get considerably more work done.”

Amazon’s top competitors in the race for AI and data center dominance are also making their workforces leaner.

Last week, Meta announced it was cutting about 600 people from its AI unit to better compete in the global AI race. The unit, led by chief AI officer Alexandr Wang, who previously led start-up Scale AI, is part of the company’s “superintelligence” lab, which aims to develop systems that are smarter than humans. Meta poured $14.3 billion into Scale AI before poaching co-founder and CEO Wang and reportedly has since offered multimillion-dollar pay packages to lure AI talent from competitors.

Google has also reportedly made cuts to several of its units this year as part of internal reorganisations. Similarly, Microsoft cut several thousand employees across its organisation as it continues to invest in AI ambitions. Following the layoffs, CEO Satya Nadella told employees in a memo that Microsoft was investing more “than ever before,” that the “overall headcount is relatively unchanged,” yet, “at the same time, we’ve undergone layoffs.”

THE WASHINGTON POST