That's because the actual thing we are paying for is scarcity.
If there are 100 people willing to work hard, but we only need 90 of them, they will get paid little, because any of them can be easily replaced.
If there are 90 people with some rare skill, and we need 100 of them, they will get paid a lot, because any of them can easily find a new job. (In theory. In practice, the employers will take some coordinated action to prevent this.)
Ironically, doubling the productivity of the people with the rare skill could dramatically reduce their income, because now there are still 90 of them, but we only need 50.
Only to a point. When you have large wants, but low capacity to meet those wants, then that is true. The law of diminishing returns however is that the utility to an individual declines as efficiency rises. It isn't a linear relationship.
The other factor to consider is that the nice-to-have wants from greater productivity in labor may just be required for me to accumulate more scarce resources especially as the population of the world grows. Opportunity cost eventually make me prioritize my investment elsewhere rather than adding scope as you say.
The industries where AI doesn't touch/win, or have real world scarcity constraints even in the face of AI is ironically where the power will be. Hence people saying to get into trades, and physical skilled jobs where we are still winning the arms race against AI for some time yet.
If there are 100 people willing to work hard, but we only need 90 of them, they will get paid little, because any of them can be easily replaced.
If there are 90 people with some rare skill, and we need 100 of them, they will get paid a lot, because any of them can easily find a new job. (In theory. In practice, the employers will take some coordinated action to prevent this.)
Ironically, doubling the productivity of the people with the rare skill could dramatically reduce their income, because now there are still 90 of them, but we only need 50.