Let's unpack that because its complicated.
I have written about the intertwining of fairies and the dead before in a blog that was an excerpt from my book 'Fairies'. The subject is very convoluted and there really is no direct answer to the question "Are the fairies human dead?". Ultimately we would have to say yes, no, and maybe. So instead of going for simple let's look at the mythology and folklore and explore a bit about why they are connected and why not all fairies human dead.
Yes there are some humans among the Good People although its a bit unclear whether they are/were actually dead or whether the Fair Folk took them alive and made it seem like they had died with glamour and changelings. Let's leave that aside however and just assume okay they are dead and were taken and made into fairies. Humans becoming fairies is a thing in folklore, sure. However there's nothing in folklore indicating that all the Daoine Maithe are former humans and there's material that does indicate that some of them have never been human.
The Riders of the Sidhe [fairy mounds] predate the Tuatha De Danann going into the fairy hills in Irish mythology and are referenced in the Fate of the Children of Tuirenn as being allied with the TDD prior to their war with the Fomorians. This is, in mythology, prior to the arrival of humans in Ireland. The TDD themselves are said to be among the fairies - the aos sidhe - now after having gone into the fairy hills when humans took over Ireland. There are also types of fairies that are not humanoid at all or primarily, things like water horses for example. And I would hope it would be obvious that nature and land spirits are not human.
A big aspect of the 'human dead are fairies' argument hinges on the idea that some of the known fairy mounds are actually neolithic burial sites. This is true. But there are a few problems with this argument as a basis for assuming that the fairies are human dead or rooted in human dead as a belief. First of all we have no idea if our iron age ancestors were aware that the neolithic mounds were burial sites; just because we know this now does not mean they knew it. Secondly, and more importantly, not all fairy hills are neolithic burial mounds and not all sites believed to be homes of the fairies are mounds. There are fairy hills that are old forts (not burial sites) and there are places like lakes, trees, caves and mystic islands also associated with the Good People. There is a spot on the side of Benbulben that is literally unreachable by humans that is said to be a doorway to Fairy. So we need to be very cautious in reducing this to simply neolithic burial mounds = sidhe = aos sidhe= human dead. It is not that simple.
There is also an abundant amount of folklore in Ireland relating to ghosts and hauntings as well as practices connected to the seasonal visitations of dead relatives that make it clear that traditionally there was a degree of separation between most human spirits and fairies. It was never assumed that everyone who died went into the fairies. quite the opposite. And one should remember that a person taken by the fairies could be theoretically rescued - there are stories of this being done successfully. But I have never once seen a story in folklore of a person bringing a ghost or regular dead person back to life.
Folklore and anecdotes make it clear that the Good Neighbours only take specific people for particular reasons. If they take a person and make that person into one of their own there is a reason for it, always. Maybe as a servant. Maybe breeding stock. Maybe to increase their own numbers or (in Scottish lore) to pay a tithe. Maybe as a nursemaid. But there is always a reason they want that specific person.