[fhd2]

Exactly, I find the math fairly simple:

1. Employee costs x;

2. Employee produces output worth y;

3. Your profit from this particular employee is z = y - x.

So far so good. Let's assume z > 0, though of course it's not an easy statement to make with many roles, that are more like investments. But let's assume they're good investments and you're confident z is positive.

Now, if the same employee produces 2y, but doesn't receive a raise, z just improved significantly, it more than doubled. So effectively, labour just became cheaper in relation to the value of its output.

If it was that simple, layoffs would hurt profitability significantly.

Now what if you can't translate improved productivity to additional value? Simple example would be an agency with a fixed contract volume. If increases in y can't be realised, e.g. by finding more business, then the only way for the company to realise the gains is to reduce x, i.e. layoffs. z goes up right away, no business development required.

I think it's a defensive stance companies are taking. The economy is not great, they're hitting the breaks on investments, increasing their runway, shrinking to force the organisation to become more efficient. Once they're ready to invest again, they can always hire again. But I read layoffs-because-AI as "we don't know what to invest in right now, so we'll buy some time to figure that out".