The Manufacturing Renaissance? Why It's Not Coming (And What We Should Do Instead)

Lately, I’ve been paying more attention to manufacturing. It’s hard to ignore—it keeps showing up in the news.

But in reality, manufacturing accounts for a relatively small percentage of jobs in Canada and the U.S.:

9% in Canada
10% in the U.S.

Manufacturing employment has been declining across most developed economies. In the U.S., it dropped from 13% in 2000 to just below 10% in 2022. Even in Germany—where manufacturing is relatively strong—it has fallen to less than 20%.

If we zoom out and look at shares of employment across industries, we see that globally services are growing to about 50% of all jobs, and in North America the share is greater, almost 80%:

At first glance, bringing back manufacturing sounds great. More jobs at home, well-paying roles, and a thriving consumer class to buy the goods we produce. A true economic win-win.

But I don’t see it happening. And here’s why:

1. Business Follows the Bottom Line

Companies manufacture where costs are lowest—it’s a simple financial decision. Labor is cheaper in Bangladesh or Vietnam, regulations are fewer, and overhead is lower. If producing shoes in the U.S. costs 100% to 200% more, businesses have to ask: will consumers pay that much extra? The (somewhat) free market has already made its decision, and it’s hard to imagine it reversing course.

An insightful economist Paul Krugman makes the point that "no serious person wants the apparel industry to come back."

2. Automation is Replacing People

Modern factories aren’t what they used to be. They’re sophisticated, automated, and require fewer workers than ever. Even if manufacturing returns to North America, the jobs won't follow in the same numbers. A factory that once employed 1,000 workers might now need only 200 highly-skilled technicians to operate advanced machinery.

3. Cultural Shift Toward Knowledge Work

North American culture values knowledge-based jobs—finance, law, tech, and medicine. Manufacturing is no longer seen as an aspirational career path. On top of that, immigration policies are limiting the workforce that traditionally filled these jobs. Even in Germany, where trade education is culturally supported, manufacturing still only accounts for about one-fifth of jobs.

From Paul Krugman again:

The fact is that the world needs fewer manufacturing workers than it used to, just as it no longer needs a lot of farmers, and even countries that run big surpluses in manufacturing trade can’t buck that trend. This doesn’t mean that we should abandon efforts to promote manufacturing where that makes sense. But we should do so with a realistic appreciation of the fact that we are going to be mainly a service economy no matter what, and that if we really want to help workers we have to make all jobs better, not dream of a return to an old-time economy.

Source: Paul Krugman, A Note on Trade Deficits and Manufacturing

The Real Challenge: The Quality Gap

Building on Krugman's point - how do we make all jobs better?

What made manufacturing jobs special wasn't just making things—it was what these jobs provided:

Living wages that supported middle-class lifestyles
Stable employment with predictable schedules
Benefits like healthcare and pensions
Opportunities for advancement without requiring college degrees
Pride in creating tangible products

This is the real gap we need to address. As our economy has shifted to services, the quality of available jobs hasn't kept pace with what manufacturing once offered. The problem isn't just that manufacturing jobs disappeared—it's that we replaced them with lower-quality service jobs while offering minimal support for workers caught in the transition.

How do we make all jobs better?

Instead of chasing a manufacturing past that won't return, we need policies and business practices that improve service sector jobs. Here's how:

1. Fair Pay

The service sector often relies on low wages to remain profitable, but this creates hidden costs through turnover and reduced productivity. Companies like Costco and Trader Joe's demonstrate that paying above-average wages in retail is a road to profitability, and they get better retention and customer service than say, Walmart.

Policy opportunity: Beyond minimum wage increases, tax incentives could reward businesses that provide living wages in service industries, similar to how we've historically subsidized manufacturing.

2. Build Belonging

Manufacturing created natural communities through shared work experiences. Service jobs can seem more isolated, but companies like Four Seasons prove that creating strong workplace cultures in service industries drives both employee satisfaction and business results.

Policy opportunity: Encourage and incentivize employee ownership models and profit-sharing in service businesses, recreating the stakeholder mentality that manufacturing unions once provided.

3. Define Meaning and Achievement

The tangible nature of manufacturing provided clear purpose. Service work can feel less concrete, but companies that connect employees to the impact of their work see higher engagement. Healthcare and education naturally provide meaning, but even retail and hospitality can emphasize how their work improves customers' lives.

Policy opportunity: Invest in skills training specifically designed for service excellence and advancement, creating clearer career pathways similar to apprentice-journeyman-master progressions in manufacturing.

The Path Forward

The manufacturing renaissance politicians promise isn't coming back in the form many imagine. Rather than chasing yesterday's economy, we need to:

1. Be honest about the structural changes in our economy and stop promising a manufacturing revival that the economic reality doesn't support

2. Focus on upgrading service sector jobs to provide the stability, pay, and meaning that manufacturing once offered

3. Help workers transition with targeted education that prepares people for high-quality service roles

4. Celebrate and value service excellence the way we once celebrated manufacturing advances and innovation

For individuals navigating this reality:

Consider service careers with companies known for treating employees well
Look for roles where technology enhances rather than replaces human work—AI isn't coming for your job, but people who know how to use AI might be
Explore entrepreneurship in service fields, creating the kind of workplace you'd want to join

The nostalgia for manufacturing is understandable, but our future isn't in recreating the past—it's in making today's and tomorrow's jobs worthy of the same respect and reward that manufacturing once provided.