Is it safe? I believe it is and most likely the aircraft config actually seats way less than it is certified to carry.
Supply and demand. The airlines are providing what the market is prepared to buy. With options for those who want to upgrade.
Cramped seating is nothing new. AOM, Corsair, what is now Air Caribes, Britannia and other tourist bombers have always had cramped seating 20 years ago. It did us no harm then. The thing is people still expect to pay 1996 prices and expect luxury.
Something has to give. If people aren't prepared to pay for it, then why should airlines provide it? Just look at AA who have recently gone 10Y on the 777 and have just two rows of first class on the A32S. Why? Because it was full of free upgrades. Nobody was prepared to pay for First, so they've acted accordingly. BA now have LCC legroom on their A32S. Times are changing.
Aircraft are vastly expensive assets and airlines have every right to configure and operate how they seek fir in order to get a return on their investment.