You are correct about the dynamics of wage labor during the industrial revolution. However, I can't say I agree with this:
> Modern automation on the other hand seems to mostly just replaced many low and medium paying jobs with a smaller number of high paying ones.
Modern automation created so much prosperity that we now have significant portions of the population doing things that 19th century people would scarcely call "jobs" -- Tyler Cowen, an economist, collects many of those on his blog, see https://marginalrevolution.com/?s=new+service+sector+jobs . Additionally, many jobs that would be recognizable to them are now done by greatly increased number of people. Consider, for example, a job of university administrator: as such, this job would make sense to 19th century people. However, the idea that university employs more administrative than research or teaching staff would seem rather ludicrous to them. The reason we can do it is that the productive sector of the economy creates so much surplus, that we can through regulation, taxation, and social custom funnel so much of it to people doing jobs that are not by any means crucial to the functioning or prosperity of the society.