AI is already replacing offshore jobs – with U.S. workers a long-term target

Artificial intelligence is not taking your job just yet, according to MIT's State of AI in Business 2025 report. Instead, AI is predominantly replacing outsourced, offshore workers.Why it matters: As U.S. workers feel the pain of a tight labor market coupled with fears of a white-collar bloodbath, any disruption from AI is so far hitting farther afield, the MIT findings suggest, even though its longer-term risk is much greater.What they're saying: "There doesn't seem to be any layoffs…Jobs most impacted were already low priority or outsourced," Aditya Challapally, leader of the Connected AI group at MIT Media Lab, tells Axios.Instead of replacing workers, organizations are finding real gains from "replacing BPOs [business process outsourcing] and external agencies, not cutting internal staff," according to the report.Zoom out: While 3% of jobs could be replaced by AI in the short term, Challapally said that nearly 27% of jobs could be replaced by AI in the longer term.Industries that are considered advanced adopters of AI see the nearest-term labor impact.Over 80% of executives surveyed within tech and media, the only two sectors that showed clear signs of AI disruption, anticipate reduced hiring volumes in the next two years.Still, most companies surveyed are currently backfilling workers with AI, for example, rather than replacing them.By the numbers: For now, rather than replacing workers with AI, companies are just canceling contracts that involve outsourced labor, a strategy that's leading to financial gains.Back-office automations also have a higher return on investment, with $2 million to $10 million in BPO expenditures eliminated for the firms studied by MIT researchers.One company studied saved $8 million a year by spending $8,000 on an AI tool.Between the lines: 50% of AI budgets flow to sales and marketing, based on estimates.That could indicate that front-office tools are getting more investment even though back-office tools save more money.It can also be harder to measure front-office AI-driven successes. (It's difficult to tell if AI helped you close more sales in a year, for example.)Be smart: For investors betting on AI to drive productivity gains, the report offers hope and risks.95% of organizations investing in generative AI are getting zero return on that investment.But companies are seeing "significant increased productivity," Challapally says.The bottom line: If AI boosts productivity in a way that helps companies cut costs without causing mass layoffs, it could be a Goldilocks scenario for investors—fueling earnings growth while avoiding the economic drag of widespread job losses.

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