Layoff remorse: Gartner says at least one in three positions eliminated by AI will be restored by 2029–at a higher cost

Gartner on Wednesday said that it expects 30% of the positions eliminated by AI-related layoffs to be refilled by 2029, suggesting that the initial terminations were ill-advised and excessive.

“When business and IT executives look back on the early AI era, they will realize their greatest mistake was believing that work automation was the point, when workforce amplification was the opportunity,” said Tori Paulman, VP analyst at Gartner. “The competitive advantage will go to the CIOs and business executives who build an AI-shaped organization where AI value compounds by reshaping roles and allowing workflows to cross traditional boundaries, increasing velocity and reducing friction.”  

The Gartner report noted that it is finding that the cuts “deplete talent pipelines and erode institutional knowledge.” Beyond the immediate workforce disruptions associated with any mass layoff, companies will also face steep increases in costs for recruitment, training, and onboarding.

It also predicted that, by 2027, “75% of organizations that prioritize capturing AI productivity gains as cost savings will be eclipsed by competitors that aggressively reinvest those gains into innovation, modernization and upskilling.”

In an interview with Computerworld, Paulman said that the 30% figure represents the average impact on organizations of all sizes; they estimate that the layoff boomerang for enterprises would be even higher, roughly 40%. 

Paulman said that Gartner’s research found a lot of what they called “AI washing” by executives who want/need to do layoffs for purely budgetary reasons, and will falsely blame AI for the reductions because it makes them look better.

“More than 50% of our enterprise clients have been given a number [by their bosses],” Paulman said, and have been told by senior management to find that percentage of savings from AI.

But despite widespread evidence of problems due to AI-related layoffs, such job cuts are still increasing. 

Layoffs were ‘excessive’

Other analysts and consultants agreed with the Gartner suggestion that many of these job losses attributed to AI are going to be walked back, but questioned the specific statistic. Some also noted that 70% of the AI-attributed layoffs may remain in force, which would suggest that the original terminations were mostly justified. 

However, Frank Dickson, principal analyst at Dickson Research, argued that a lot of the layoff reversals will occur in a variety of ways that will obscure the fact that they are restoring a terminated role. 

“A lot of that 70% never shows up as a clean rehire even when the original cut was wrong,” he said, pointing out that some of the losses caused service to quietly get worse, and stay poor, some of the work was contracted out or offshored, some of the roles were reconstituted with a different position or title, and some was covered by the remaining staff absorbing the load. This,” he noted, “shows up later as burnout and attrition, not as a line item on this report. None of that gets counted in the 30%, and none of it is evidence the original call was sound.”

Melody Brue, principal analyst for Moor Insights & Strategy, added that the 70% scenario “could show that a substantial share of the AI-related workforce reductions is durable,” but, she stressed, “it shouldn’t be mistaken for endorsement of how those layoffs were made. What it doesn’t show is whether the organization captured the full economic value it expected. A lower headcount is not by itself evidence of a successful AI transformation.”

Valence Howden, advisory fellow at Info-Tech Research Group, questioned the methodology behind the calculation of Gartner’s 30% figure, but he agreed with the overall sentiment that layoffs attributed to AI have been excessive.

“I’m not sure we can substantiate those numbers, since it’s much more of a guesswork statement than anything else,” he said. “I do believe the current trend is going to lead to rehiring, especially as AI governance requirements ramp up and given AI’s lack of contextual semantic understanding. We know AI has not provided the value proposition that it has been sold as providing, and unless costs are controlled, it will be cheaper to use humans to perform some of the advanced work.”

Supporting data

Dickson also raised questions about the Gartner report because it lacked comparative layoff statistics. 

“Gartner doesn’t say what the reversal rate looks like for ordinary layoffs, the ones that have nothing to do with AI,” he said. “Suppose normal cuts get walked back at 10% to 15% in a typical five-year window, which is plausible given ordinary churn and business-cycle rehiring. A 30% rate specific to AI-driven layoffs would still run well above that, and that’s a damning number. Without that comparison, 30% is just a figure floating with no anchor.”

However, Dickson pointed to various datapoints supporting the position that AI layoffs have been excessive, noting that Forrester reported that 55% of businesses “already regret AI-driven cuts and are predicting half of those layoffs get quietly reversed.” 

“Robert Half puts it at a third of hiring executives who eliminated roles for AI having already rehired. Ford, IBM, Booz Allen Hamilton, Alphabet and CSX have all walked back cuts or announced rehiring drives,” Dickson said. “Gartner’s 30% by 2029 sits comfortably inside that range.” Klarna has also walked back AI layoffs. 

A ‘major indictment’

He added that many AI layoffs amounted to a corporate version of a crash diet. “You cut fast, you look great on the next earnings call, and eighteen months later, the weight is back, plus interest, because nobody fixed why the cut was made in the first place.”

Gartner’s Paulman agreed, noting, “business and IT executives who use AI primarily as a tool for cost cutting risk making reductions that are too deep and too soon, affecting their ability to innovate their business model and compete in new markets as AI continues to mature.”

Mike Wilkes, enterprise CISO at Aikido Security, said that even if the 30% figure turns out to be accurate, it is a major indictment of the layoffs. 

“If 30% of AI-driven layoffs must be reversed, that is an enormous error rate for a strategic workforce decision,” Wilkes said. “Imagine any other major capital decision where nearly one-third had to be unwound at a premium three years later. No CFO would call that a strong outcome.”

This article originally appeared on Computerworld.