Why do you think labor is demand capped and not supply capped?

In the short term we're going to see first movers downsize as they scale up artificial labor to maintain status quo production.

But those first movers are going to have effectively dug their own grave when other companies instead keep head counts high but scale up production with the additional support of artificial labor.

So you'll have one company offering their same slate of offerings with the same marketing at 1/10th the labor costs, pocketing the difference. But then their smarter competition will have 10x the variety in offerings with 10x more targeted or niche marketing efforts at the same labor costs.

The companies that prioritize their quarter over their 5 year performance are going to die out.

The greater job loss isn't going to be driven by automation but by outsourcing, which is going to be easier than ever with the ways translation is going to be improved to the point of seamlessness using AI as an intermediary. So no matter what the job a human working from home in the US can do, someone else can do it a lot cheaper elsewhere even when it requires reading and writing a lot of English.

The threat is realistically less "AI can do your job" and more "another human aided by AI will take your job."

If the US government were smart, they'd be investing in nationalized AI as a public utility similar to the USPS and passing laws restricting outsourcing labor or at least taxing/tariffing the labor itself significantly, using the proceeds from both ends of this pincer approach to fund social services or basic income.

Because you're right that draining main street is going to be bad news for progress. But it's not that AI is going to do this inherently. It's a very specific aspect that's going to do this in most cases, with demand for human labor remaining high as production scales up and out.