The objective truth of current facts is on your side, but the conclusions and the moral side are not nearly as clear-cut.
Does the mill produce less? Does it generate less profit? Unlikely; probably its production has even grown, and even if unit price of the product dropped, the sheer bulk of production makes up for that.
But that profit is no longer going to the pockets of 900 employees. Most of it is pocketed by a small circle of owners/investors. Automation removes jobs, but it also redirects funds from pockets of employees to pockets of owners of the machines.
And as much as you'd like to cry wolf about liberty of economy, and as much as you'd want to blame the employees for being low-skilled, and making poor life choices, there simply is no market in the area for the 800 redundant employees, no matter what their skillset or talent or dedication or education. Automation reduces need for work globally, and your town is representative of the world - people lose jobs, starting from lowest-skill, but if every single of them had a great college degree and a wonderful skillset, they still wouldn't find enough workplaces - and likely, these who would, would introduce more automation, and make even more people redundant. And make investors, who purchase the automation solutions even richer.
It's also a trap, because while production volume increases, cost drops, profits soar, the money must come *from somewhere* - precisely, from pockets of customers, common people buying the product. And if the people lose sources of income, they cease buying things that aren't absolute necessities. It's a bubble that must burst - wonderful modern unmanned factories producing goods nobody can afford.
In other words, that model is not sustainable. More automation means less workplaces globally, not *just* in these sectors. Less employed mean shrinking market. Shrinking market means less income for the owners - and as result, further cuts - further automation, less jobs, less income for common people and more market shrinkage.
This may still be considered "fair" according to the natural capitalist narrative - but it IS a problem heading straight for a disaster. It absolutely requires system-wide solution, because no matter what these people do, no matter what skills they obtain, job market will only continue to shrink in the long run, and the number of unemployed will only grow. Maybe universal income. Maybe something else. I don't know. But blaming the situation on people's life choices is entirely misguided. There's only so much work for skilled, expert labor, and that amount - despite persistent shortages - is lower than the number of people who will lose jobs. Education is a solution for some, but not for all - and the number of those will only grow.