AI is not increasing productivity or leading to job losses, finds a study

Time of India

20-05-2025

A new study by the National Bureau of Economic Research in Denmark has found that the use of
Artificial Intelligence
(AI) in workplaces has had a very limited impact on employee pay and work hours. The report, based on data from 25,000 workers across 7,000 offices, shows that while AI is being adopted quickly, it is not transforming productivity or leading to job losses.
Study looked at jobs most exposed to AI
The research focused on roles that many believe are most at risk from AI—accountants, customer support specialists, financial advisors, HR professionals, software developers, and teachers. These professions are often seen as likely to be changed or replaced by new AI tools.
No big change in pay or hours worked
Economists Anders Humlum and Emilie Vestergaard, who authored the paper, said, "AI chatbots have had no significant impact on earnings or recorded hours in any occupation." On average, workers saved three percent of their time due to AI. But only three to seven percent of these productivity gains resulted in higher pay for them.
No sign of major disruption
The study found no evidence of people losing their
jobs
or of any large rise in productivity due to AI. The authors wrote, "While adoption has been rapid, with firms now heavily invested in unlocking the technological potential, the economic impacts remain small." They added, "Modest productivity gains (average time savings of 3 per cent), combined with weak wage pass-through, help explain these limited labour market effects. Our findings challenge narratives of imminent labor market transformation due to Generative AI."
Some firms still cutting staff for AI
Despite these findings, some companies continue to replace workers with AI. Cybersecurity firm CrowdStrike, which was in the news last year for a global IT outage, recently said it would cut five percent of its workforce and use AI instead. Language learning platform Duolingo also announced that it would "gradually stop using contractors to do work that AI can handle." The company said it had made a similar move in 2012 when it shifted its focus to mobile technology.
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Company rehires humans after AI fails to meet expectations
Swedish fintech company Klarna is preparing to bring back more human workers after depending heavily on artificial intelligence (AI) for customer service tasks. The company had earlier reduced its workforce and automated several functions using AI tools but now says the results were not as expected. Klarna executives admitted that AI customer agents could not match the quality of service delivered by humans.
Automation led to performance drop
Over the last two years, Klarna worked closely with OpenAI to cut jobs and automate operations. By 2023, it had paused hiring and used AI to handle most customer service functions. This move helped the company save money, including $10 million on marketing. AI systems were used for tasks like translation, content creation, and data analysis. However, Klarna's CEO Sebastian Siemiatkowski later said, 'Cost unfortunately seems to have been a too predominant evaluation factor when organising this, what you end up having is lower quality.'
Staff strength saw a major drop
According to Klarna's IPO filing in March, the total number of full-time employees dropped from 5,527 in December 2022 to 3,422 by the end of 2024. The company said AI was doing the work of around 700 customer service agents. Even in late 2024, Siemiatkowski had said, 'AI can already do all the jobs that we, as humans do.' But the company's recent shift suggests otherwise.
Other firms cutting jobs for AI too
Klarna's move is part of a wider trend in the tech and finance sectors. CrowdStrike, a cybersecurity company, recently said it would cut five percent of its staff and shift some roles to AI. Similarly, Duolingo announced plans to reduce the use of contractors for tasks AI can handle. The language-learning app said it would automate more internal processes and limit new hiring to teams that cannot automate further.
Microsoft cuts 6,000 jobs amid AI expansion
Microsoft has also joined this trend. The company laid off about 6,000 workers, or nearly 3% of its global workforce, as it pushes further into AI. Among those let go was Gabriela de Queiroz, Director of AI for Microsoft for Startups. 'I was impacted by Microsoft's latest round of layoffs. Am I sad? Absolutely,' she wrote on social media. According to Bloomberg, over 40% of the roles cut in Washington state were in software engineering. The company said it was reorganising to simplify management. Despite losing her job, de Queiroz said she stayed a bit longer to finish meetings and say goodbye, writing, 'That felt right to me.'
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