As organizations race to adopt AI, some are investing in workforce development to complement the technology, while others are shifting resources to tech—and away from people.
According to a recent study by outplacement and executive coaching firm Challenger, Gray & Christmas, AI is the leading cause of job cuts in 2026 and was cited in more than 120,000 dismissals in the first nine months of the year, representing about 21% of all layoffs. Those cuts have been concentrated largely in the technology sector, says Andy Challenger, the firm’s chief revenue officer.
“Because its products and investments are in building artificial intelligence itself, they’re just way more affected by investments in AI,” he says. “We may very well see jobs being replaced by artificial intelligence in all these other sectors as it becomes easier to use, and it can really be deployed in ways that replace people’s jobs.”
Challenger adds that for most employers, job cuts are a last resort. He contends that organizations will typically seek out other ways to trim their human capital budgets first, and that those smaller cuts could be an early signal of layoffs to come.
“When we see a cooling labor market—like we’ve been seeing the last couple years—we tend to see companies slow down hiring, raises, and benefits, and then finally get to layoffs,” he says. “That would be expected if companies are trying to cut costs to reinvest more capital into artificial intelligence.”
That’s the approach many non-tech industry employers appear to be taking as they seek to free up capital to invest in the technology: more money spent on AI, less on the humans who work for them.
It’s not just layoffs that are impacting workers
In a survey of 866 U.S. business leaders by Resumebuilder.com, 54% said their companies have or will reduce employee compensation and reallocate those funds toward AI spending this year. Bonuses are the most popular budget item to get redirected into AI, followed by equity or stock options, raises, benefits, and base salaries.
Meanwhile, according to the latest Bureau of Labor Statistics report, hourly wages are up 3% this year, but inflation increased 3.4%—meaning workers have effectively seen a net loss in earnings.
“There’s a lot of talk about AI replacing jobs out there. But our survey is showing the other ways that employers are looking at increasing those investments, and they’re reducing employee compensation in some way to fund it,” says Stacie Haller, Resumebuilder.com’s chief career adviser. “Employees need to understand that it’s not just the loss of a job that might be affecting them.”
Haller explains that business leaders are finding themselves under immense pressure to stay current with the latest AI developments, and the funds to do so need to come from somewhere. As tough decisions are being made, however, she emphasizes the importance of leaders remaining honest and transparent with their staff.
“They just want to understand what’s happening in their company,” Haller says. “For employers who are making these changes, just let your folks know what you’re looking at, why it’s important to the company, why you’re taking these strategies, and what they should expect. Workers just want to know what’s going on.”
Companies are split between people-first and AI-first strategies
As they seek to free up funds for AI investments, organizations appear to be split between two approaches: one that puts the technology at the center of their operations, or one that elevates the value of their staff.
According to a recent study by benefits technology provider Businessolver, 27% of C-suite executives are cutting head count to fund AI, but only 18% are also investing in upskilling their staff. On the other hand, more than a third of those who are trying to avoid layoffs are also investing in workforce development.
“If I believe that the majority of my workforce can be replaced by AI, then why would I invest in them?” says Marcy Klipfel, Businessolver’s chief human resources officer. If, however, an organization believes its strategic value relies on human expertise, Klipfel says it’s much more likely to invest in attracting, retaining, and developing that talent.
How an organization answers that question may also depend on its governance structure.
“There’s just a reality that public companies have to hit their numbers quarter over quarter, and that’s just a different environment,” she says. “It’s part of being a public company and part of having shareholders.”
Klipfel explains that investor pressure can lead public companies to cut staff and invest in technology without upskilling their remaining workforce. While that approach might help them hit their quarterly targets, Klipfel warns that it’s likely to cause longer-term challenges.
“You can be making decisions that ultimately don’t unleash the power of AI because you simply don’t have humans behind it making sure that it is checking all the boxes,” she says.
Moving resources away from people and toward technology could also discourage remaining staff from embracing AI, reducing the effectiveness of the organization’s AI adoption efforts.
“If you’re not respecting what humans bring to the table, that will come at the expense of AI efficiency,” Klipfel says. “The data is overwhelming that companies who hit that empathetic sweet spot outperform across all success metrics.”
