US companies are in serious cutdown mode in early 2026. According to data from Challenger, Gray & Christmas, US company layoffs rose 205% from December, 2025 to January, 2026.
While many companies have pointed the icy finger of blame at AI for recent layoffs, some observers are beginning to wonder whether executives are using the technology as an excuse to mask other internal issues that reflect poorly on the company and its leadership. Management gurus say that it’s a phenomenon known as “AI-washing", e.g., blaming AI for cuts that firms really want to make, but don't want to take the blame.
AI washing defined, and its impact on management and employees
AI washing is a concept that’s taking flight as AI ascends in the workplace. Here are five reasons why that matters.
Dressing up dicey management decisions
“AI-washing, in the context of layoffs, is when companies attribute job cuts to artificial intelligence when the real drivers are far more mundane, such as over-hiring during the pandemic boom, margin pressure, slowing consumer demand, or plain old corporate restructuring,” said Scott Dylan, founder at NexaTech Ventures, an AI and technology fund company.
The term borrows from "greenwashing," and it works in much the same way. “It lets companies dress up an unpopular decision in the language of progress,” Dylan noted.
For management, it’s a dodge on layoffs
Dylan noted that the January layoff numbers from Challenger, Gray & Christmas are striking, with108,435 job cuts. That’s the worst US employment layoff count since 2009.
Yet, as Dylan points out, when you look at the data more closely, AI was explicitly cited in only about 7,600 of those.
“In actuality, the biggest contributors were contract losses, market conditions, and restructuring,” he noted. “UPS cutting 30,000 jobs had nothing to do with AI and everything to do with severing ties with Amazon $AMZN. Andy Jassy himself initially linked Amazon's cuts to AI, then walked it back, pointing instead to over-hiring and too many management layers. That kind of inconsistency is exactly the problem.”
That matters because it distorts the public's understanding of what AI can do today. “AI washing feeds anxiety that isn't grounded in reality, and it lets executives dodge accountability for strategic missteps,” Dylan noted.
AI washing as a corporate vision
So why would a CEO take a calculated risk and blame AI for layoffs, in lieu of any mistakes the company has been making, for massive staff cuts? Management experts say it’s all part of a C-suite job: blame AI for job cuts and rake in the AI-fueled revenue boosts down the line.
“When leadership blames AI for workforce reductions by saying 'AI took your job,' they offer a future-oriented narrative about innovation that investors have rewarded in the past,” said Tamas Hevizi, chief strategy officer at Tungsten Automation.
This presents a vision of their organization where margins are higher, operations are more efficient, and growth is accelerating, and all because of AI – and it doesn’t stop there.
“Beyond presenting a more favorable narrative, AI-washed explanations protect leaders from reputational damage from broader organizational failures,” Hevizi said. “It’s easier to say AI is changing the way the world works and workforce reductions are a natural consequence than to admit they misread demand, overspent on AI pilots, or, more simply, hit hard times.”
CEOs also have incentives to shift blame to AI rather than acknowledge failures
“The AI angle makes you look like a visionary instead of someone cleaning up their own mess,” said Jason Schloetzer, an associate professor at Georgetown's McDonough School of Business. “AI-washing provides executives with a reason that's difficult to disprove, given AI's genuinely complex impacts. It's psychologically easier to tell employees that their jobs are being eliminated by technological change rather than by leadership incompetence. “
CEO’s also use AI washing because the market rewards it
“That's the blunt answer,” Dylan said. “No CEO wants to stand up and say, "We got it wrong." Blaming AI shifts responsibility onto an external, seemingly unstoppable force.”
In doing so, it depersonalizes the decision and positions the company as forward-looking at precisely the moment it's taking a deeply unpopular action.
“Forrester's research from January made this point clearly,” Dylan said. “Many of the companies announcing AI-related layoffs don't actually have mature AI applications ready to replace those roles. They're cutting now based on speculative future capabilities, which is a very different proposition from genuine operational transformation.”
Dylan points to Dutch-based tech giant ASML $ASML, which cut 1,700 jobs in January while posting strong financial results. “Their CFO didn't invoke AI at all. Instead, he said it was about reducing layers and letting engineers do their work. That kind of honesty is rare, and it stands in sharp contrast to the firms wrapping their layoffs in AI branding.
Yet companies that blame AI for employment cuts are taking a major reputational risk with an audience that matters – their employees.
“Workers’ trust is arguably the most corrosive consequence of AI washing,” Dylan said. He points to Mercer's Global Talent Trends 2026 report, which found that employee concerns about AI-related job loss have jumped from 28 per cent in 2024 to 40 per cent this year, and 62 per cent of employees feel their leaders underestimate the emotional and psychological impact of AI on the workforce.
“Glassdoor's research on the 'great employee-leader divide' reinforces this, as workers are increasingly skeptical of what their leaders tell them,” Dylan added. “If you've been told your job was eliminated because of AI, and you can see the company doesn't have the AI to do what you were doing, that breeds a level of distrust that's incredibly difficult to repair.”
When it comes to using it as a crutch for layoffs, the C-suite can do better
Rather than vague claims about "AI transformation," companies should provide investors with the nuances of layoffs with full transparency.
“CEOs could say: 'Of 500 positions eliminated, approximately 150 are directly attributable to automation of specific back-office functions, while the remaining 350 reflect shifting market conditions and strategic realignment,” Schloetzer said. “Investors can handle complexity.”
At a crisis point for workers, the C-suite should come clean and explain why the company needs to eliminate 15% of the workforce.
“Is it to free up capital necessary to make AI-related investments? The C-suite knows the real reason,” Schloetzer added. “So just say it.