Trump's Industrial Nostalgia Misses the Modern Economy

In 1950, nearly one in three American workers had a job in manufacturing. Today, it's fewer than one in twelve. Despite decades of decline, political rhetoric in the U.S. and across the developed world remains obsessed with factories. Donald Trump’s repeated promises to “bring back manufacturing” reflect a broader nostalgia-driven campaign to restore an industrial golden age that no longer exists.

But this vision isn’t just unrealistic. It’s economically regressive, strategically flawed, and rooted in a fundamental misunderstanding of how modern economies grow and change.

The decline of U.S. manufacturing employment is not a 21st-century story, it’s a postwar story. Employment peaked at 19.5 million in 1979, before recessions, automation, and trade shifts pushed it down. The nadir came in 2010, at just under 11.5 million jobs. A modest recovery brought the number up to 12.3 million by early 2019. But even then, the share of manufacturing in total non-farm employment had plunged from over 26% in 1970 to about 10% today.

This dramatic drop is the result of several converging forces: deep structural changes in technology, global patterns, and consumer demand.

A Global Decline: The Inverted-U of Industrial Employment

Manufacturing employment doesn’t just shrink in America. It follows a common global pattern. Data from the Groningen Growth and Development Centre confirm that industrial employment rises during early development but falls sharply once countries reach higher income levels. This "inverted-U" curve holds across countries: Germany, Britain, China, and others all show a steep decline in industrial employment as GDP per capita rises.

This isn’t a policy failure. It’s the natural byproduct of rising productivity and structural economic transformation.

In fact, the decline in factory jobs is what the IMF calls “the natural outcome of successful economic development.” As countries get richer, employment shifts from goods to services, and labor-intensive production is outsourced to lower-cost regions.

More Output, Fewer Jobs

U.S. manufacturing output has more than doubled since the early 1980s. In real terms, the country produces more goods than Germany, Japan, and South Korea combined. If U.S. factories were counted as their own country, they would rank as the world's eighth-largest economy. Yet, as Robert Z. Lawrence of Harvard notes, these gains were achieved with far fewer workers. Today, fewer than 4% of Americans work on a factory floor.

This dramatic drop is not due primarily to globalization. A study by Michael Hicks and Srikant Devaraj estimates that 88% of manufacturing job losses between 2000 and 2010 were due to productivity gains, not trade. The factory job disappeared not because it was stolen, but because machines do the work better and cheaper.

Globally, this trend holds true. From 2013 to 2023, the world lost 20 million manufacturing jobs even as manufacturing output grew by 5%. Automation and digitization have replaced manual factory work with robotic precision and algorithmic control.

The Vanishing Premium

In the mid-20th century, manufacturing jobs were well-paid, unionized, and offered security to workers without a college degree. That world is gone. According to data from the Economic Policy Institute and the Current Population Survey, wage premiums in manufacturing have all but vanished, especially for non-college workers. Today, jobs in construction, transport, or the skilled trades often pay more and offer better benefits.

At the same time, union coverage has collapsed. In the 1980s, one in four manufacturing workers were unionized. Today it’s fewer than one in ten.

For non-college workers, the wage premium in manufacturing has entirely disappeared even though such workers still enjoy wage advantages in sectors like construction and transportation.

Automation and the Rise of White-Collar Factories

Modern factories are not havens for displaced blue-collar workers. Less than a third of U.S. manufacturing jobs are now held by those without college degrees. The majority of jobs are white-collar, engineers, managers, designers. These roles require specialized skills and often don’t match the nostalgic image of a lunch-pail economy.

Even if America “reshored” all its manufacturing to eliminate its $1.2 trillion goods-trade deficit, the number of factory jobs created would be modest, about 3 million, half of them not even on the production line. Lawrence calculates that such a reshoring campaign would cost $600 billion in tariffs, about $200,000 per job.

Even these jobs aren’t what they used to be. Today’s factories are capital-intensive and technologically advanced. Factory-floor jobs account for less than 4% of the U.S. workforce. Half of all “manufacturing” jobs are now in functions like human resources, engineering, and marketing.

Misguided Industrial Policy

Politicians argue that reindustrialization is vital for security and growth. But recent history tells a different story. India has failed to meet its manufacturing GDP targets, yet remains a high-growth economy. China dominates global manufacturing sectors, but its economy is struggling to meet growth expectations. Even China has shed more than 20 million factory jobs since 2013.

The idea that the West must counter China’s industrial model with its own dirigiste policies misunderstands both China and the West. China’s 29% share of global manufacturing value added stems from scale, not statecraft. Rich countries can’t win a competition for jobs that are vanishing globally.

Nationalist reshoring strategies ignore the resilience of diversified supply chains. As COVID-19 demonstrated, flexibility and global cooperation are better tools for handling crises than economic isolationism.

The most effective way to challenge China's dominance is not autarky, but forming large, open trading blocs. “The world is in the grip of a manufacturing delusion,” and the longer countries cling to it, the more self-defeating their strategies become.

Where the Good Jobs Are Now

The real heirs to the stable, middle-class manufacturing jobs of the 1970s are not found on factory floors. They are electricians, mechanics, HVAC technicians, solar-panel installers, and police officers. These occupations offer decent wages, union representation, and don't require a university degree.

Over 7 million Americans work in the skilled trades and another 5 million work in repair and maintenance. These jobs are growing, unlike manufacturing, which is projected to decline further.

In fact, these trades now better match the qualities we once associated with manufacturing: steady income, middle-skill access, and social utility. Unionization rates are higher in these sectors, and demand is set to grow, especially with infrastructure upgrades and the transition to clean energy.

The fastest-growing sectors for non-college workers are in healthcare and personal care. These fields may offer low pay today, but with the right policies and productivity enhancements, including AI, they could become the backbone of future working-class prosperity.

The Myth of Industrial Growth

Many still believe that manufacturing is the key to growth. But services now dominate advanced economies not because they are low value, but because they are where modern productivity growth increasingly resides. Manufacturing, by contrast, has seen stagnating productivity.

Engel’s Law provides a simple explanation: as incomes rise, consumers shift spending from goods to services. In 1950, goods made up 60% of American consumption. Today, services account for two-thirds.

Source: https://www.economist.com/finance-and-economics/2025/06/10/factory-work-is-overrated-here-are-the-jobs-of-the-future

Attempts to engineer industrial revivals ignore this shift. Disappearing factory jobs are an inevitable part of economic development. Fighting the structural transformation of labor markets is not only costly, it’s futile.

A Better Path Forward

Thomas Jefferson once saw farming as the heart of economic virtue. By the 20th century, that role had shifted to manufacturing. Today, it must shift again. The heart of the American working class now beats not in factories, but in skilled trades, logistics, healthcare, and services.

Instead of fighting to revive a past that cannot return, America should focus on empowering the labor markets of the future: boosting service productivity, expanding vocational education, investing in care work, and adopting technologies that raise wages where growth is real.