An AI startup powering Meta and OpenAI cut thousands of workers — then offered them a similar project for less money

Mercor, an AI startup that collaborates with major tech giants like Meta and OpenAI, has left thousands of its contract workers in a difficult position this week. The company announced the abrupt end of its extensive Musen project, citing changes in project scope, which took many by surprise. An email obtained by Business Insider revealed that workers were informed of the termination on Tuesday, despite previous assurances that the project would continue until the year's end. Shortly after the news broke, Mercor offered these contractors a chance to join a new initiative called Nova, but at a reduced pay rate of $16 an hour—$5 less than what they were earning on Musen. Founded by three Thiel fellows, Mercor is valued at around $10 billion and plays a crucial role in the data-labeling sector, which is essential for the ongoing AI revolution. Major companies like Meta and OpenAI rely on firms like Mercor to enhance the accuracy of their AI models by employing human workers to categorize and tag various types of data, including text and videos. At its peak, over 5,000 individuals were engaged in the Musen project, and many expressed astonishment at the sudden shift, particularly since they had been reassured about the project's longevity. A spokesperson for Mercor disputed claims about the prior communication but did not clarify which details were inaccurate. Meanwhile, Meta has chosen not to comment on the situation. The new Nova project promises more consistent workloads and higher caps on hours but has left many contractors feeling undervalued. One former Musen worker, who transitioned to Nova, remarked that while the tasks were similar, the pay cut felt demoralizing. "We wanted to boycott this but are not in a financial place to do so. We needed to have the guaranteed income, even if it's demoralizing," the contractor shared. Many of the affected workers recalled that they had previously earned as much as $60 an hour for different roles. With the shrinking budgets and changing landscapes in the data labeling industry, Mercor's actions reflect a broader trend, as other companies like Scale AI and Elon Musk's xAI have also made significant cuts to their workforce in recent months, prioritizing higher-paid specialized roles over generalist positions.