It is false that all jobs have been out sourced or replaced by machinery. Just take a look at the distribution of employment in the different sectors of the economy.
Prices of output are determined by consumer demands, not costs of production. Higher wages cannot be passed on to consumers by raising prices. If it were true that businesses could raise prices without any negative repercussions in lost sales, then businesses would have already raised prices before they had to pay higher wages. Businesses always ask the highest prices they can given consumer demand. If they ask prices high enough, the amount people buy will decline.
Consumers cannot pay ever higher prices for goods unless the money supply increases. With a given stock of money in society, if consumers pay more for some goods, they must pay less for other goods. Regardless of whether an entrepreneurs are producing in a market in which their output prices are rising or falling, their input prices will adjust accordingly. If their output prices are rising, then they will increase their demands for inputs and drive input prices up until no additional profit can be made. If their output prices are falling, then they will decrease their demands for inputs and drive input prices down until no losses are suffered.