A great discussion so far!
As to the OP, automation replacing human labor has been a constant factor in human history for a long time. And so far, humans have always adapted for the better. However, there are signs that this time may be different:
1) We are running out of growth options. In past history we could expand to new lands and new resource pools. But we have found every land, and most of our mining work now is a better exploitation of existing pools....not finding new ones.
2) Machines are starting to replace "thinking" jobs. In the past, when machines replaced our human labor, we turned to more "thinking" labor, using our brains more than our bodies. While machines are still not at the point where they can replace our general thinking, they are adapting to replace certain aspects of human thinking (look at the progression of the self driving car as an example).
The market has spoken many times, that once a machine can do a job as well or better than a human...the market will take the machine. So once machines can "think" as well as a human... what would humans do for work?
This is the trend that is occurring, and the competitive drive for efficiency and innovation will continue to push this trend forward. Now governments can regulate and unions mandate...but like a finger plugging a hole in the dam it is only going to be so effective. The trend will continue to push, and I think the result will be a large portion of the human population that will be unemployed.
That is a scary proposition, but without some radical change (like a fundamental collapse of society...which is certainly possible) I don't see the trend stopping.
What can we do about it? I have a few ideas:
1) Population Control: What has started in China is going to have to spread to the rest of the world. The bottom line is there are simply too many of us, and modern living does not require the large family to deal with huge mortality rates. Either we do it ourselves...or nature will do it for us, and I promise you she will not be kind about it. With a reduced population, unemployment will be less of a factor and we don't have to compete for resources as strongly.
2) Crafting a workless lifestyle: We basically have to redesign the entire concept of modern living. First of all, with the assumption that an unemployed person is the norm...and has no negative social stigma.
But beyond that, we have to craft an economic lifestyle for that person that will let them live on a provided "living wage". This would be the evolution of welfare into a hopefully better system. Lets be honest, welfare is not a good system as written...but the fundamental needs that it is trying to address are only going to get stronger as unemployment rises. We aren't going to get away from a welfare system, but we do have to change it.
Part of that may be the recognition that some quality of life aspects are going to go down. Here is an easy example. Right now, even USA's poor generally have access to electricity 24/7. We might be able to provide electricity to them at 1/6 the price....but they only get it at certain times of the day (perhaps 8 hours a day, at key times when electricity can be generated the cheapest).
Another example: Our medical system and our drugs try to limit pain and side effects as much as possible. In some cases there are cheaper alternatives, but they involve some short term side effects and discomfort. If I can provide you a drug that will have you healthy in 2 days with no side effects....or give you a drug for 1/8 the price that will take a week and leave you feeling miserable.....number 2 may become the default option in order to make healthcare affordable. I think people would agree that not getting cured would be a worse alternative.
Then of course there is the social factor....what will people do with all of their freetime (again assuming machines have replaced the bulk of human labor)? That one I leave to others, as I have few good ideas to bring to the table.