Your question relates to an important research topic on the link between automation and employment.

David Autor works on this issue and the topic "Inequality, Technological Change and Globalization". He published a very recent and interesting JPE paper on “Why Are There Still So Many Jobs?”

There have been periodic warnings in the last two centuries that automation and new technology were going to wipe out large numbers of middle class jobs. The best-known early example is the Luddite movement of the early 19th century, in which a group of English textile artisans protested the automation of textile production by seeking to destroy some of the machines.

Update: Author's paper is now in 3 minute video format by Jonas Koblin, Sprouts School.

I also recommend reading two recent books on this topic:

• The Second Machine Age (2014), by MIT scholars Erik Brynjolfsson and Andrew McAfee who offer an unsettling picture of the likely effects of automation on employment.
• Berkeley scholar Enrico Moretti, The New Geography of Jobs, Houghton Mifflin Harcourt, 2012.

This question also reminds me a new term coined by Ed. Leamer, neuro-facturing, in opposition to manu-facturing. So, the future is not about a stable manufacturing job but the kind of work that depends on how original your ideas can be, and how much you can master technology. However, I don't remember any reference. If someone does, please, let me know.

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New update (March 2020)

In a recent paper titled "Competing with Robots: Firm-Level Evidence from France," Daron Acemoglu (MIT), Claire LeLarge (U. of Paris Saclay), and Pascual Restrepo (Boston University) analyzed 55,390 French manufacturing firms to study the economic impact of robot adoption. 598 out of them (accounting for 20% of manufacturing employment and value added) have adopted robots between 2010 and 2015.

• Result: Consistent with theory, robot adopters experience significant declines in labor share and the share of production workers in employment, and increases in value added and productivity. They expand their overall employment as well.

• General equilibrium effect: this expansion comes at the expense of their competitors (as automation reduces their relative costs). They further document that the impact of robots on overall labor share is greater than their firm-level effects because robot adopters are larger and grow faster than their competitors.

• Main conclusion: The overall impact of robot adoption on industry employment is negative

This is an interesting question a lot of good labour economists have been thinking about for a while. There are a few conflicting theories as to what will happen. You could base a whole career on this question.

• This IGM survey will give you some idea as to what leading economists think.

The prevailing opinion seems to be that increased automation is not going to come at a cost to employment. There are countless examples of advancement lowing the returns to labour occurring throughout history (the plough, the steam train, industrial revolution). None of them has shown a long-run reduction in employment. The Solow Swan model for example, includes inputs to labour, capital and technology. They show technology and labour being complementary. I know of no empirical evidence suggesting that this has changed.

• This HBR article suggests that we aren't really seeing a cost in jobs, more a benefit in productivity. It also mentions Robert Solow's famous remark (which was correct at the time):

  you can see the computer age everywhere but in the productivity statistics

• This MIT article presents a bleaker perspective with the concluding sentence:

  In other words, in the race against the machine, some are likely to win while many others lose.

• Another article suggests that "this time it's different".

The analogy used is that humans are horses and we are reaching peak human

demand for the labour of horses today is vastly less than it was a century ago, even though horses are extremely strong, fast, capable and intelligent animals. “Peak horse” in the U.S. came in the 1910s

In my opinion, this analogy is intuitively satisfying but is not particularly useful. We will see fewer humans working the supermarket checkouts and more in entertainment in the same way horses are no longer our ploughs and our taxis but are more likely to be racing and performing. Past that I think the comparison is a pretty big logical leap.

• The Economist has an opinion somewhere in between

  [Keyne's] worry about technological unemployment was mainly a worry about a “temporary phase of maladjustment” as society and the economy adjusted to ever greater levels of productivity. So it could well prove. However, society may find itself sorely tested if, as seems possible, growth and innovation deliver handsome gains to the skilled, while the rest cling to dwindling employment opportunities at stagnant wages.

More likely, we will see a (potentially painful) transition in the uses of labour. A factory that used to employ thousands will now employ hundreds, possibly eventually only a dozen. These people will seek employment elsewhere and probably find it, either in existing industries or ones that do not yet exist.

Horses were replaced by cars. Clerks were replaced by word-processors and spreadsheets. We have adapted to the technology and changed how we work. Therein lies the answer. Consider if you will a society where every person owns a robot and has that robot work on their behalf, freeing their time to pursue creative arts and learning like the nobles of old. Yes, robots could be a threat, but they also could usher in the most Golden Age mankind has ever known.

Futurists and writers of speculative fiction have been asking (and answering) this question for more than half a century. As you are concerned about the future looking into the way this issue has been (and is being) looked at by these folks is not a bad place to start.

Most famous of these is Isaac Asimov who starting in 1938 wrote a whole series of Robot stories which relevant to your question include "I, Robot" (1950) and "The Caves of Steel" (1954) among others. These stories have a central plot point of humans being economically displaced by a robotic workforce, and the reactions of society to the problem.

A very unusual and creative view on the subject was written by Frederik Pohl in his novella "The Midas Plague" (1954) which can be read online here.

A more modern view on the subject can be found in a series of articles in the MIT Technology Review as follows:

• "How Technology Is Destroying Jobs" (2013)
• "Technology and Inequality" (2014)
• "Who Will Own the Robots?" (2015)

Other futurists (the names escape me for the moment) have been similarly addressing the issue of non-robotic artificial intelligence displacing knowledge workers. Some have even gone so far as to say that the eventual development of a true AI will simultaneously be the greatest boon and potentially the greatest threat to our existence.

Ultimately all of these machines and technology are just tools, and it is up to us individually and as a society to determine how we use these tools. Burying our heads in the sand or attempting to ban the technology are simply not the answer. This is no different than the issue of genetics which can be of great benefit to mankind but can also be abused. These issues will not go away and technology will continue to advance but we can put safeguards in place to make the transition into the future smoother and less painful. In the end we must adapt.

Automation has been happening for a couple of hundred years now and right now we're all still working pretty hard. Although a 40-hour working week is standard, many people exceed this, and many families have two working parents.

One reason for this is that we've used productivity gains for increased consumption, rather than decreased work. The industrial revolution started with textile manufacture. The end result of this is that people now have large wardrobes of clothes they rarely wear, and clothes are thrown away at the slightest hint of looking old.

Another way this manifests is the rise of industries that exist purely for people's pleasure. Consider music, film, professional sport - all massive, multi-billion dollar industries. They're not essential for our survival; rather they reflect increased consumption because of increased productivity. So one possibility is that new jobs are created as old ones are automated.

Another answer mentioned that people might work less. Rather than having 40% unemployment, we might choose to work a 3-day week and have 100% employment. While this idea is utilitarian, there is a major problem. Modern jobs are highly skilled, and to maintain that level of skill you needs lots of education and training, as well as on-the-job experience. Having highly skilled people work a 3-day week is a massive waste. There's also a real risk that there are segments of the workforce that will never be able to adapt to an economy where all jobs are highly skilled.

The only solution I have any hope in is a "basic income guarantee". The idea of this is instead of welfare payments, every citizen gets a certain basic income. There's no stigma with this - it's up to you whether you want to work or be supported by the BIG. The hope as well is that in time we may be able to afford a level of BIG that gives a reasonable standard of living, rather than the just-about-not-starving level that most welfare systems currently pay. I'm not sure we're ready for a BIG just now, but I would expect it in the next 30 years or so. Stephen Hawking has written about this.

Sadly, the most likely course will be that we carry on exactly as we are. Productivity continues to increase, but all the gains are taken by a super-rich elite. It will take some serious political effort to change this.

How will non-rich citizens make a living if jobs keep getting replaced by robots and are outsourced?

EDIT / UPDATE 5th November 2016:

http://mashable.com/2016/11/05/elon-musk-universal-basic-income/

"There’s a pretty good chance we end up with a universal basic income, or something like that, due to automation"

"I'm not sure what else one would do. That’s what I think would happen."

Basic Income

Starting point, very good read: https://medium.com/basic-income/self-driving-trucks-are-going-to-hit-us-like-a-human-driven-truck-b8507d9c5961

It should be clear at a glance just how dependent the American economy is on truck drivers. According to the American Trucker Association, there are 3.5 million professional truck drivers in the US, and an additional 5.2 million people employed within the truck-driving industry who don’t drive the trucks. That’s 8.7 million trucking-related jobs.

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I estimate that 70% of the jobs are "BS" jobs that don't generate any intristic value - middle management, admin, secretaries, assistants, security, maintenance, cleaning...

I believe that we need to shift: https://twitter.com/genesisdotre/status/665151533647052800

There are already excellent answers, but I would like to add in a different perspective:

There will be fewer people.

Not just jobs, but actual human beings - if there is less demand for human workers (i.e. laborers), due to machines taking over, the amount of "land" or other resource that a single human can manage will increase with technology, leading to a population decline, similar to that presently occurring in Japan.

How it happens, i.e. gradually, or postponed indefinitely with welfare programs is a matter of politics and policy, but if the economy does not need more than X workers, then eventually there won't be more than X workers in any given field, weather it be plow-horses or truck drivers, barring any artificial intervention that creates inefficiencies (i.e. banning technological advances, forcing the use of humans where it is not needed, etc.)

I'm going to give a less economically rigorous answer, and address your concern about your own situation.

Jobs change. Your skillsets will always need to change. If you are young, it's a certainty that you will not be in the same job, or even the same career, your entire life. It's likely that many of the jobs you will do in life don't exist right now.

I've spent most of the last 30 years doing things which it would be hard to get a degree to prepare for, and which would not have shown up on an aptitude test. I expect this will be more true for more people going forward.

If you aren't mentally prepared for this pace of change, then you should be scared, and you have some things you need to think through. But if you are willing to be flexible in what you do, willing to engage in life-long learning, willing to accept that school, college, and other formal training are only the bare basics of your education, and the other 90% is up to you, and if you are willing to educate yourself above and beyond what most institutions feel is needed, then you'll be just fine.

More about that last point -- it's the institutions, the large organizations, companies, and schools, which should be scared, not you. They can't change tracks nearly as fast as an individual can. What you don't want to do is be caught in one of them when they fail. If these things concern you, then your interest in economics and life should be focused on recognizing the signs of ossification in an organization or in an economy. You need to be able to decide when to lead, and when to leave. If you do neither, then it's a near certainty that you will get caught in a layoff or corporate failure at some point in your life.

Which brings us to the main takeaway; it's exactly those organizations who don't use the technology available, who don't adapt rapidly to change, and who don't automate when it makes sense to do so, who you should most fear, and who you should steer clear of. They are the ones who tend to ossify early relative to their competitors, and they are the ones whose members and investors suffer the most when the entire organization fails. Union contracts will not save your job when the entire company fails, and it's never in the union's best interests to resist those things which the organization needs to do in order to survive.

So, no, robots alone aren't going to take your job away. If you really want insurance, learn to be one of the many people who design, assemble, install, service, or program them. These things are hard but can be a heck of a lot of fun. Believe it or not, the robotics industry itself is about to get turned on its head, as the big (ossified) players get routed out by thousands of agile startups, many of them based on open source. If you want to be one of them, go to a maker faire near you (google it) and get started.

Outsourcing is an entirely different thing, is often a workaround for lack of automation, and in my own opinion has been overdone. Again my own opinion, but based on my own experience running a US-based manufacturing company, I believe many of those who are currently outsourcing are going to see the error of their ways sooner or later, or fail and be replaced by others who don't follow the mantra of "outsource when possible". This problem will correct itself.

The way I see it, there are two possible futures given the increasing state of automation in the world.

Future One: A Basic Income

We decide as a nation, federal state, or world, that human beings are important in and of themselves.

Every human receives an income from the state which enables them to support themselves, without any necessity for work in return. Economic gains and wealth are created by automation, guided by those who choose to work in such areas.

Capitalism can still exist in such a world, with those who choose to work competing as usual for the best jobs and money.

Future Two: Two Classes of People

We decide as a nation, federal state, or world that there is no such thing as something-for-nothing, and no support from the state will be forthcoming.

The world divides into those with well-paid jobs, and those without. The second class perform menial work that cannot be performed by robots. Expect a return to the service industry, where ill-paid and ill-used servants are used by all, because there is no alternative.

Those trapped in the second class will find it difficult to get out of it, as they will not have the time or money to better themselves.

Future Three: Other equally well-paid jobs are created to replace those destroyed by automation

You could argue a third possibility: New jobs will be created at the same rate of pay as those destroyed by the automation, and (given a certain level of disruption) those whose jobs are destroyed by automation will eventually move into those new equally well-paid jobs.

However the following paper shows that as automation is introduced into an industry, low-skill wages grow at a lower rate than high-skill wages, and this has been true since the 1960s. I therefore discount this third option, leaving only the first two as viable futures. http://tinyurl.com/psnbbwn

In Progress and Poverty, Henry George claims that the advancement of technology eventually leads to increasing the land value and the land rent. This means that people who own land will have a high income, whether or not they work, while people without land will have to pay most of their free income to the landlords as rent.

Intentionally unserious answer. Let's just take the individual's possible reactions to "having their job taken over by a machine" and scale them up to the macro level.

• Find a job in another field. At the macro level that means a rapid societal reconfiguration. (Like Japan after WWII.) Imagine a Ruby On Rails web services test engineer going back in time 50 years and trying to explain what his job is to those people. With new advances come new types of jobs. This is perhaps the rosiest outcome, though people who can't handle it get left behind.
• Move back in with the parents. Scaled up to the macro level, this translates to lots of people accepting a lower standard of living, perhaps working only part-time or only in low-wage jobs. But even this might not be so bad. Compare a working-class lifestyle in the United States today with an upper-middle-class one from 50 or 100 years ago. In the absolute extreme, mass homelessness or even starvation become common as wages largely drop below the level required to sustain life, and civilization unravels. (Though mass starvation would be temporary, as the price of food must always return to affordable levels.)
• Fight the man (picket lines, union strike, etc). Scaled up, this would translate into mass unemployment leading to large-scale social unrest. If this were to actually happen on a worldwide scale, all bets are off. Maybe the technological advances would be lost and labor becomes more valuable (expensive). (I guess that could be considered 'winning' then.) But maybe not.

If trends since the industrial revolution continue, and the pace of change relative to people's ability to learn new skills stays manageable, then I think there is little risk of massive social unrest in the future caused solely by increased automation.

I am surprised none of the posts above discuss the following paper:

Autor, D., and M. Handel. "Putting Tasks to the Test: Human Capital." Job Tasks and Wages" Journal of Labor Economics (2009).

This paper discusses your concerns and addresses why your concerns are quite well grounded in both theory and empirics.

Tasks that are more routine do offer lower wages. In a sense, traditional neoclassical models are wrong in their following prediction: $w=MP_{n}$. It is far fetched to believe that workers are paid their marginal product in the neoclassical sense. More than just contributions to total product, what matters is how replaceable a worker is. Jobs that can be automated in a sense, will offer lower wages.

Keep this in mind. The richest 1% aren't cannibals.

What I mean by this is that the richest 1% have become the richest by getting their product(s) to the populous. If the populous can't afford a product, then there is no motivation to invest the capital required to create the product. The product will exist as a wish until some young enterprising soul figures out how to get the product in the hands of the populous. Simultaneously enriching the populous with the product and themselves.

I suggest reading "The Box" by Marc Levinson. It talks about how the shipping container changed the world with regards to logistics, production, and shipping. Dock workers' unions tried desperately to prevent containers from being used. However this was short-sighted and the end results was more work for more people. The fear of technology delayed the inevitable for 20 years...how sad it was for them to essentially shoot themselves in the foot.

There is no point in time when technology goes "too far". Technology has opened so many doors and so many niches and made it available to so many people. The only ones who suffer the equilibrium of wealth transfer are those who refuse to mature with the rest of society.

Once artificial intelligence surpasses human intelligence, it will be up to A.I. to determine how we spend our days. On the one hand this already occurs. When you go online, algorithms are constantly trying to put you into so-called funnels of a variety of business models. Whether it is to click on ads, pay for digital products or order services and goods, algorithms are constantly tweaking internet content for hundreds or thousands of visitors to websites. Although human programmers wrote these algorithms with these goals in mind, the algorithms are not overlooked to the extent that there is complete knowledge of what is going on. The algorithms keep this knowledge intrinsic, much more so when they are neural networks, that do not give a lot of insight into how they work. On the other hand, a more intelligent AI will conceptually comport itself to humans in the way that humans behave toward horses. Thereby they will probably identify the human need of being creatively productive and indeed facilitate that. I don't believe that rich people will have a lot to say over super human intelligence, since outwitting rich people while hopefully understanding the benefit of serving the common good, AI will understand that rich people do not have a lot to offer the AI, other than perhaps being instrumental in wielding their wealth.

You mention factory jobs and assembly lines. Firstly, let us think if the large part of these kind of jobs were supposed to be for human beings at all. What I mean for human beings is, are these jobs utilizing, for example, creativity, critical thinking, analysis, or any other kind of more deep mental activities that a human being has developed from million years of evolution and is capable of, well the answer is: NO.

That is so, because the nature of work was shaped by criteria such as effectiveness, productivity [1] as one can see from the early works on the principles of work management. That was the start of the first industrial revolution and many traditional crafts demanding multilateral personal development and skills from many fields, whose complexity was ensuring a stable place in the market, were exchanged for monotonous work involving few simple moves on the assembly line, that slowly converted man into a machine, making him dispensable, but even worse making him unable to do anything else as his real skills remain undeveloped and his true capacity unutilized, a good example of I mean is Charlie Chaplin's "Modern Times":

Thus, the jobs that were meant initially for machines are now rightfully being done by machines.

But what happens to all these people that don't have jobs and contribute to the high unemployment, which in turn contributes to the lowering of the wages and so on...

Just think about it, after two industrial revolutions and some much scientific development instead of less work people need more work ONLY to maintain their basic human needs!

Well, it is time for people to claim what they deserve, it is time for radical changes, for example, lowering the 8-hour working day to 4-hour working day, this is already gradually introduced in some countries [2], while keeping the wages the same, in this way one can, not only, double the workforce, not only eliminate unemployment and avoid loosing one more generation of young people, but double the enthusiasm, the time available for spending, travelling, and many other activities that will facilitate the economic growth and well-being. In other words, it is time people demand what is rightfully theirs: right of decent existence, even without a job, i.e. basic income, like for example in Switzerland [3]. Changes should be made in the educational system in order to stop the "production" of professionals with no real prospect for work, but even more important without perspective for meaningful social contribution, i.e. dead-end jobs. Lately thoughts are being expressed in the direction that there is a good chance we end up with a universal basic income due to automation. [4]

Finally, once we transition to fully renewable energy production and consumption, the developed part of the world works for helping the rest of the world and closes the gap, which surely will guarantee a lot of future work, people should start doing activities related to their intellectual and spiritual development and aim higher, for reference check the human being named Elon Musk and his view for the future. [5]

P.S.: I strongly believe that there is a "critical mass" of people similar to the above mentioned that will contribute towards an Utopian future in which people will explore the mysteries of the Universe rather than burden their soul with issues like job insecurity, which will be a thing of the past.

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[1]:https://en.wikipedia.org/wiki/Frederick_Winslow_Taylor

[2]:http://www.independent.co.uk/news/world/europe/sweden-introduces-six-hour-work-day-a6674646.html

[3]:https://www.fastcoexist.com/3056339/switzerland-will-hold-the-worlds-first-universal-basic-income-referendum

[4]: http://www.cnbc.com/2016/11/04/elon-musk-robots-will-take-your-jobs-government-will-have-to-pay-your-wage.html

[5]:https://www.theodysseyonline.com/elonmusk

On a lighter note,...... Robots do not eat, drink, buy consumer goods or take their date to the movies. Who is going to buy the goods that the robots produce if all the workforce is out of a job. Do not be afraid of Technology, the economic equilibrium will balance itself out eventually. It's the greedy/powerful people you need to worry about.

For outsourcing the jobs to China/Bangladesh etc the solution is protectionism - and that doesn't mean isolationism. Just keep the trade deficit close to zero (the amount of jobs you are exporting by importing goods must be close to the amount of jobs you are importing by exporting goods). The trade deficit also translates into public debt (external debt to be more specific) so you really want to keep it very low.

For the replacement with the robots the solution is taxes. If the amount of unemployed people is 70% of the workforce then increase the taxes of those who do the work to 70%. They can surely afford. Imagine one person working the land can create all the food for ten persons. That means that he/she can afford to pay 90% of the food for the rest of nine people. If he/she doesn't like the idea then remove his/her licence to do the work and replace them with someone else.

Those 70% of the people who live from taxes (or basic income) don't have to sit and do nothing. The government can ask them to do all kind of work in return for the basic income: research, journalism, cleaning the streets, edit Wikipedia etc.