I've beaten this drum before, but I'll bang it again:
Do not confuse the hypothetical details for discounting of the whole narrative, i.e., "Don't miss the forest for the trees."
This is what a lot of us have been banging on about in some form since the opening salvo in generative AI: it doesn't matter what its technical deficiencies are, so long as it's good enough to replace enough labor, enough of the time, to collapse the underlying economic engine (that is, consumer spending). That's what this hypothetical is trying to lay out, and honestly it's not far off from the truth as to what's actually going on.
With constant RIFs but rising profits, there is simply no brake whatsoever to this cycle: myopic boards and self-interested leaders (paid mostly in stock) have no incentive to stop this behavior, even as it kills the economic engine of the past few centuries. They make out like bandits, and use that money to insulate themselves from the harm they created - or attempt to for as long as possible, until governments and/or the public demand their carcasses on pikes for destroying their livelihoods.
It's not a matter of whether or not folks find something to do when work is irrelevant so much as we're not building a society where that's feasible as an alternative. We're not expanding welfare, we're not employing rent controls or price caps/floors, we're not increasing accessibility to housing and healthcare and education; instead, we're letting a handful of practicing sociopaths take everything for themselves under the guise of "number go up, so it must be good".
"So what's the alternative?"
I am so glad you asked, because the alternative is a societal judo throw on contracts and expectations. It's incentivizing larger workforces and shorter work weeks as a means of gauging share value: how many workers can you support with higher wages to spend on goods and services with AI increasing the revenue per employee? It's not paying companies to hire workers so much as markets valuing companies that retain workers despite AI's ability to displace work. It's inverting their tax burden based on how big their workforce is and how well they're compensated (higher paid workforces + larger workforce size = lower tax bill, because worker wages will just get dinged accordingly by income and Capital Gains taxes instead of payroll taxes).
The point isn't to keep nitpicking how these hypotheticals are alarmist, or how a specific detail is wrong, but more to highlight that this is a very real problem in the face of permanent job displacement due to any sort of competent generalized artificial intelligence now or in the future, and deciding to solve it before there's riots in the streets.
You can see the symptoms already if you look hard enough: the gig economy is already oversaturated with workers to the point wages are decreasing for everyone, and autonomous vehicles are displacing them in major metro areas. Commercial shopping spaces are increasingly empty with the exception of major brands, who in turn increasingly consolidate under holding companies. Private Equity is already in crisis with assets nobody can afford to buy at their valuations but unwilling or unable to take losses in the face of angry consumers and governments.
We can't put AI back in the box, but we can at least acknowledge that these problems are here, now, and if we don't address them soon then the entire economy is likely to collapse beneath our feet in the next few years.