Baker McKenzie, the world’s ninth-largest law firm by revenue, announced in February that it would cut roughly 700 business services staff. The stated reason: AI. The firm said it was “rethinking the ways in which we work, including through our use of AI, introducing efficiencies.”
The same week, OpenAI CEO Sam Altman told CNBC-TV18 at the India AI Impact Summit: “There’s some AI washing where people are blaming AI for layoffs that they would otherwise do, and then there’s some real displacement by AI of different kinds of jobs.”
Altman is right. And the data shows the “AI washing” side of the equation is far larger than most people realize.
The Numbers Don’t Add Up
In January 2026, U.S. companies announced 108,435 job cuts — the highest monthly total since 2009. AI was explicitly cited as the reason in approximately 7,600 of those. Over the course of 2025, AI was mentioned in about 55,000 layoff announcements out of 1.2 million total cuts, roughly 4.5 percent.
But even that 4.5 percent overstates AI’s actual role. A Harvard Business Review analysis published in January found that companies are “laying off workers because of AI’s potential — not its performance.” Many firms announcing AI-driven restructurings do not have mature AI systems capable of replacing the roles they are cutting.
Forrester Research’s 2026 workforce predictions put it bluntly: half of all AI-attributed layoffs will be quietly rehired, but offshore or at significantly lower salaries. Fifty-five percent of employers surveyed said they regretted laying off workers because of AI.
A National Bureau of Economic Research study surveying thousands of C-suite executives across the U.S., U.K., Germany, and Australia found that nearly 90 percent said AI had no impact on workplace employment over the past three years.
The Baker McKenzie Case
Baker McKenzie generates $3.4 billion in annual revenue across roughly 4,500 lawyers, yielding about $721,000 in revenue per lawyer. That puts it well below elite firms like Wachtell ($4.47 million per lawyer) or Cravath and Davis Polk in the $3-4 million range. Baker McKenzie’s business model depends on high volume and global reach, not premium pricing.
The 700 cuts target support staff — research, marketing, know-how, and secretarial functions. No lawyers are being let go. The firm’s own statement frames AI as one factor among several in “positioning the firm for continued growth.”
Joe Patrice at Above the Law was skeptical: “I don’t know if Baker McKenzie really believes it can replace 700 staff with AI or if blaming the bots just provides a convenient excuse.” He noted that current AI agents are “still stumbling with multi-stage tasks” and that the real efficiency threat to BigLaw comes not from AI replacing staff wholesale, but from clients using AI tools to avoid expensive law firm work in the first place.
The pattern fits a broader trend. Companies with flat or declining margins are using AI as a narrative device to justify cost-cutting that shareholders and markets reward. Saying “we are restructuring for AI” sounds forward-looking. Saying “we are cutting costs because our revenue per employee is below competitors” does not.
The “AI Washing” Playbook
The term “AI washing” — borrowed from “greenwashing” — describes companies attributing layoffs to AI capabilities they do not actually possess. The playbook has three steps:
Step 1: Announce cuts, cite AI. The press release mentions “AI-driven efficiencies” or “rethinking how we work.” This frames the layoffs as strategic rather than reactive.
Step 2: Collect the market reward. Investors reward companies that appear to be ahead on AI adoption. Stock prices respond favorably to cost-cutting narratives, especially when wrapped in tech-forward language.
Step 3: Rehire cheaper. Forrester’s data shows that many of the cut roles get refilled offshore or at lower salaries. The net effect is wage arbitrage disguised as technological transformation.
ASML, the Dutch semiconductor supplier, cut 1,700 jobs in January 2026 while reporting a 16 percent jump in net sales and a 19 percent increase in gross profit. Its CFO said the company was choosing to make changes “at a moment of strength.” Amazon cut 16,000 positions in January after eliminating 14,000 in October, even as its AWS unit posted 24 percent revenue growth.
Where AI Is Actually Displacing Workers
The dishonesty of AI washing makes it harder to identify places where AI genuinely is replacing human work. Those cases exist, and they are growing.
Anthropic CEO Dario Amodei has warned of a potential 50 percent reduction in entry-level office positions as AI coding and writing tools mature. Altman himself acknowledged that “the real impact of AI doing jobs in the next few years will begin to be palpable.”
The difference is specificity. When a company deploys an AI system that demonstrably handles tasks previously done by humans — automated customer service, AI-assisted document review, code generation replacing junior developer hires — that is real displacement. When a company announces a 10 percent headcount reduction and sprinkles “AI” into the press release, that is narrative management.
Who Wins, Who Loses
Winners: Corporate executives get to frame routine cost-cutting as visionary strategy. Shareholders reward the narrative. Consulting firms sell AI transformation plans. Offshore labor markets absorb the rehired roles at lower wages.
Losers: The 700 Baker McKenzie support staff who lost their jobs to a technology the firm likely cannot deploy at the scale it is implying. Every worker whose layoff gets attributed to AI, making it harder for them to argue their role was eliminated for mundane financial reasons. And, perhaps most importantly, public understanding of AI’s actual capabilities — which gets distorted every time a company claims its AI can do things it cannot.
Altman’s candor on AI washing is notable precisely because OpenAI benefits from the narrative that AI is powerful enough to replace workers. When even the CEO of the company selling the technology says companies are using AI as an excuse, the gap between AI hype and AI reality deserves closer scrutiny than it is getting.