Are QueerRats normal people who were mutated by those with psychic powers into weak creatures?

The opening scene of thise episode also affirmed that while the world developed a society stabile on the surface, it's no doubt withering away. We don't know how many children are pruned due to not awakening to powers, but I suspect it's a lot, and they further remove those not developing strongly enough despite awakening. It's not really a situation that would encourage population growth, plus I reckon lots of crimes are also punishable by death (or whatever else, but nonetheless removing the people from the psychic gene pool).

It's nicely successful how it's depicted these kids are living "happily" without realising how twisted their world is.