AI Job Cuts: The Surprising Truth About Customer Service Layoffs and Why Companies Are Rushing to Rehire
Customer Experience Dive16 hours ago
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AI Job Cuts: The Surprising Truth About Customer Service Layoffs and Why Companies Are Rushing to Rehire

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Summary:

  • AI-driven layoffs are less common than believed—most 2025 job cuts were due to government actions and economic conditions, not AI adoption

  • Customer service staffing remains surprisingly stable, with only 20% of leaders cutting agent headcount and 55% maintaining steady levels

  • Companies cutting jobs for AI are often doing so to fund AI investments, not because the technology is already successful at replacing workers

  • Gartner predicts half of companies that cut customer service staff due to AI will rehire them by 2027 as AI investments fail to deliver expected returns

  • Klarna's experience shows the pattern: they laid off workers after AI claims, then reinvested in human talent when AI couldn't fully replace human service

The AI Job Replacement Myth: What's Really Happening in Customer Service

Despite alarming predictions from tech leaders like Anthropic's Dario Amodei and OpenAI's Sam Altman about AI disrupting entry-level roles and eliminating customer service jobs, the reality is far less dramatic. Recent research reveals that AI-driven layoffs are not as widespread as many fear.

Why Layoffs Are Happening: It's Not Just AI

According to Emily Potosky, senior director of research at Gartner, most layoffs in 2025 were unrelated to AI adoption. Instead, they stemmed from factors like federal government actions, economic conditions, and business right-sizing decisions following hiring surges in 2021-2022.

A December 2025 Challenger jobs report supports this finding, showing that across industries, the top reasons for job cuts were:

  • Department of Government Efficiency actions
  • Market and economic conditions
  • Closings and restructuring

AI was directly cited for less than 55,000 announced layoff plans—a relatively small number compared to other factors.

Customer Service Staffing: Surprisingly Stable

In customer service specifically, Gartner found that staffing levels remain steady at most contact centers. Their December survey revealed:

  • Only 1 in 5 customer service leaders had cut agent headcount
  • One-quarter had paused backfills
  • 55% reported steady headcount while serving more customers

Dana Goldsholle, VP of business development at Arise, notes: "For AI, it's not really taking over customer service, yet. It's taking over these simpler interactions of 'Where's my order?' or it's adding efficiencies to the agent's workload."

The Real Reason Behind AI-Related Layoffs

Here's the surprising twist: When companies do cut jobs citing AI, it's often not because the technology is successful, but rather to free up resources to invest in AI. Potosky explains: "Layoffs seem to be more part of a broader strategy to invest funds in AI, hoping for success down the line."

In essence, businesses are rushing to reduce headcount before seeing AI investment returns—a risky strategy that Potosky doesn't recommend.

The Dangers of Premature Workforce Reduction

With pervasive narratives about AI efficiency gains, service leaders face pressure to rapidly reduce headcount. However, cutting too quickly leads to unintended consequences:

  • Worse service quality and customer experience
  • Harm to brand reputation
  • Operational disruptions

"The key is creating a plan," says Kathy Ross, senior director analyst at Gartner. Service leaders should develop a workforce reduction strategy based on reducing staff "over time, on their own terms and guided by data."

The Coming Rehire Wave

Gartner makes a bold prediction: Half of companies that cut customer service staff due to AI will rehire them by 2027 under new titles.

Why? Because nearly three-quarters of CIOs report their organizations are either losing money or only breaking even on AI investments. Only 11% say their most mature generative AI investment has fully met objectives.

Potosky warns: "If you are shrinking too fast and you're dealing with operational disruptions, brand reputation issues, or legal disputes, you're going to have to rehire people to address those problems."

Case Study: Klarna's AI Journey

Klarna's experience illustrates this pattern perfectly:

  • In 2024, they claimed their AI agent could do the work of 700 representatives
  • They paused hiring and laid off customer service workers
  • In 2025, they reinvested in human talent and began hiring customer service representatives again
  • CEO Sebastian Siemiatkowski now says their pursuit of an Uber-style customer service model will make human assistance a "VIP experience"

Julie Geller of Info-Tech Research Group emphasizes: "AI should augment, not replace, human service."

The Future of Customer Service Jobs

When companies inevitably rehire, what will these employees do? Potosky believes: "They're going to do the exact same work, which is part of why this is so bad. These organizations might save money in the short run, but they're going to end up having to spend more in the long run."

The shift highlights the enduring need for human connection in customer service. Rather than eliminating jobs, successful AI implementation should focus on augmenting human capabilities and handling routine tasks, while preserving the human touch for complex issues and VIP experiences.

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