Companies are overstating their AI capabilities to increase their value, creating a host of problems for both leaders and employees. They use so-called AI washing to justify layoffs and avoid government scrutiny and public scorn.
What does AI washing look like?
Another form of AI washing “involves the rebranding of traditional AI analytics,” the NYSBA said. “Regression models, statistical analyses, and even Excel-based automation tools are frequently repackaged under the banner of AI.” This allows companies to “capitalize on the commercial appeal of AI without investing in the underlying technology.” A common denominator is the use of advances in AI as a reason for layoffs.
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Artificial intelligence was found responsible for nearly 55,000 layoff plans announced in 2025 and since 2023, it has been cited in more than 71,000 job cut announcements, according to an analysis by the research firm. Challenger, Gray and Christmas. “A lot of companies make a big mistake because their CEO, who isn’t very familiar with AI, says, ‘Well, let’s go ahead and lay off 20 to 30 percent of our employees and we’ll replace them with AI,’” JP Gownder, vice president and principal analyst at research firm Forrester, told the Guardian. However, many of these companies “do not have mature, vetted AI applications ready to fill these roles,” said Forrester. As a result, “more than half of layoffs attributed to AI will be quietly reversed as companies realize the operational challenges of prematurely replacing human talent.”
Why does this happen?
AI Discussions are “full of wild exaggerations,” said Forbes. “People say technology can do everything you’ve ever dreamed of. It can be used to radically change your business instantly. AI chatbots know everything.” This makes him a perfect scapegoat for firing people. Using AI as a reason for layoffs “may be less controversial than other reasons, such as poor business planning,” said The New York Times. CEOs could also “blame layoffs on advances in AI when they simply overhired during the pandemic,” The Guardian said.
The big elephant in the room is that many companies fear the Trump administration, leading them not to blame layoffs on policies like tariffs. There has been a “real hesitation on the part of some parts of the American business community to say anything negative about the economic impacts of the Trump administration because they think there will be consequences,” Martha Gimbel, executive director and co-founder of the Budget Lab at Yale University, told the Guardian. “By claiming that the layoffs are due to new efficiencies created by AI, you avoid this potential backsliding.”