IMO knowledge work productivity has gone up a massive amount since 1990, and companies could in fact fire most of their knowledge workers while still getting their most critical work done. (These are the bullshit jobs/email jobs.) But companies mostly haven't done this, which implies other reasons for employing so many knowledge workers.
Or it might imply that this theory is just wrong?
Yes, certainly it could be wrong, it's just my personal (very vibes-based) opinion. Apologies if that wasn't clear.