Late last week, Wix joined a flurry of tech companies that have been citing AI as a motivation for layoffs, and one expert says this pattern reveals a trend companies have been reluctant to admit for years.
Avishai Abrahami, the CEO of the Israel-based website-building company, said in a post on X that Wix would cut roughly 20% of its staff, or just over 1,000 people based on its last employee count of 5,277 found in a May filing with the Securities and Exchange Commission.
In announcing the layoffs, Abrahami cited the strain that the strengthening of the Israeli currency, the shekel, against the U.S. dollar is causing for the company. But he also pointed to AI and the company’s need to adapt to changing times.
When reached for comment, a Wix spokesperson referred Fortune to Abrahami’s layoff announcement.
In his announcement, Abrahami mentioned AI as “the most significant shift in how companies are built since the invention of modern programming languages in the 1970s,” and added that Wix needed to adapt “to become a faster, leaner, and flatter organization.”
This language echoes that of Block CEO Jack Dorsey, who kicked off the year by announcing 4,000 layoffs to create “smaller and flatter” teams and a “new way of working.” Executives at Snap and Atlassian executives have also used comparable framing.
The trend of pushing for smaller teams and more productive workers isn’t new.
“They’ve been saying that for 20 years,” said Paul Osterman, a professor emeritus of human resources management at the MIT Sloan School of Management and author of the book Disposable Workers: The Transformation of Employment.
Osterman argued that what is new is some companies’ quiet admission that they don’t want more workers.
While AI is creating some pressure on companies to innovate and restructure, he believes they are mostly using AI as a cover for layoffs, a phenomenon called “AI washing,” which allows companies to spin what would usually be negative news into a positive feat that shows they are innovating. Sometimes this works. After Cisco announced it was laying off 4,000 people earlier this month, its stock jumped 13%.
“AI is a perfect excuse to justify big layoffs,” Osterman told Fortune. “It makes it seem as if it’s not our decision, our fault—it’s the technology.”
Similarly, companies often lay off employees they were going to let go of anyway during recessions, which serves as a convenient cover story, he added.
At the same time, the spurt of AI-related layoffs may also be related to the increasing number of “disposable workers,” which he estimates make up 35% of the American workforce today.
These disposable workers, such as contractors, freelancers, and gig workers, are favored in some cases by employers because they can contribute to a company’s goals, but also can be shed at any moment. Hiring these kinds of workers saves firms money on benefits and it also gives them flexibility to downsize or increase their staff when opportunities arise, something that may be beneficial as AI, to paraphrase executives, upends the way work is done.
As of the Bureau of Labor Statistics’ last count from 2023, there were 6.9 million contingent workers, like contractors or temporary workers, and they made up 4.3% of the U.S. workforce. Although this is a conservative estimate, it is an increase from 2017, when these kinds of workers made up 3.8% of the workforce.
While this trend of favoring disposable workers over employees has been building for decades, it’s intensifying, partly because of the uncertainty created by AI, said Osterman.
Yet, his research shows contractors and marginal workers face lower wages and report lower job satisfaction than standard employees. They’re also less willing to go above and beyond for their employers as a result.
Despite the bleak picture of employment, Osterman pushed back on the idea that workers should simply accept a future of disposable employment.
“We created a stable employment system of high wages and shared prosperity in the past,” he said. “That’s what we should be thinking about doing now.”
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