Why AI Isn't Improving Productivity: Employee Engagement
Author: Protik Ganguly
Global employee engagement fell to 20% in 2025 — its lowest level since 2020 — costing the world economy an estimated $10 trillion in lost productivity, roughly 9% of global GDP (Gallup, 2026). In the United States, engagement sits at 31% — an eleven-year low. No region saw engagement increase last year. Not one.
The headline number obscures a more precise story. Individual contributor engagement has held relatively steady. Manager engagement has dropped nine points since 2022, with the steepest fall — five points — coming between 2024 and 2025. Managers used to enjoy what Gallup calls an "engagement premium" — they were significantly more engaged than the people they led. That premium has effectively disappeared. Managers and their teams are now equally disengaged, which matters because managers account for approximately 70% of the variance in team-level engagement (Gallup, 2026). When the middle layer of an organisation loses its psychological attachment to the work, the disengagement cascades downward through everyone reporting to it.
The causes are not difficult to identify. Layoffs have a productivity effect that extends well beyond the people who leave. Among employees who survive layoffs, 74% report their own productivity declining, 59% report absorbing additional workload due to understaffing, and 38% report disrupted sleep (Perceptyx, 2026). Simultaneously, 54% of US workers say job insecurity significantly impacts their stress levels — an anxiety that AI acceleration has made structural rather than cyclical. Workers are no longer only afraid of losing their current job. They are afraid of being unemployable in the next one.
The AI investment paradox sits at the centre of this. Despite roughly $40 billion in enterprise AI spend, 95% of organisations have seen zero measurable impact on profits (Gallup, 2026). An independent NBER survey of nearly 6,000 global executives found 89% report no effect on labour productivity. Gallup's own data explains why: fewer than one in three employees report strong managerial support for AI adoption. The managers most responsible for translating technology investment into team behaviour are the ones who have disengaged most sharply. The bottleneck is not the tool. It is the person supposed to make it work.
The corporate response has largely been cosmetic. Well-being benefits, mental health apps, and flexible work policies have not moved the numbers. Only one in four workers feel their employer genuinely prioritises their wellbeing, and only 25% say their employer supports reskilling effectively (LHH, 2026). The research points to one intervention that works: transparent communication. When organisations communicated openly during layoffs, 61% of employees remained highly engaged — nearly three times the rate at organisations where leadership went silent (Perceptyx, 2026).
The $10 trillion cost of disengagement is the cost of a workforce that shows up but is not present. It is not measured on any balance sheet. It is visible only in the aggregate: in productivity data that disappoints, in AI investments that do not compound, in organisations that cannot understand why the tools are working but the results are not.
References
LHH. (2026, March 7). The new employability crisis in today's workforce. https://www.lhh.com/en-us/insights/the-new-employability-crisis
NBER, as cited in Julie Allen Consulting. (2026). The global employee engagement crisis. https://julieallenconsulting.com/the-global-employee-engagement-crisis/
Perceptyx. (2026, May 11). Workplace culture after layoffs: Engagement and morale. https://blog.perceptyx.com/the-layoff-aftermath-what-happens-to-workplace-culture-after-the-cuts
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