Why the Obsession with Manufacturing Jobs?

President Obama was right to prioritize growing the economy in his State of the Union address, but he is putting his faith in the wrong places.

He stressed the federal government’s central role in creating jobs

—specifically manufacturing jobs. The President stated, “We also have the chance, right now, to beat other countries in the race for the next wave of high-tech manufacturing jobs. My administration has launched two hubs for high-tech manufacturing in Raleigh and Youngstown… Tonight, I’m announcing we’ll launch six more this year.” His argument is not new. In his State of the Union address last year, the President also announced the creation of manufacturing hubs.

But the era of factory jobs as anchors of the middle class is over. The percent of Americans employed in the manufacturing sector is gradually declining, from a peak of 39 percent of nonfarm payroll employment in the early 1940s to 9 percent today, even as the sector's productivity has continued to grow. 

This is not reason for worry. In the 1950s, manufacturing accounted for over a quarter of GDP. Now it contributes 12.5 percent. However, GDP increased 500 percent during that period, and manufacturing productivity increased over 300 percent. This is progress. Instead of feeling nostalgia for an antiquated economy, the president should be leading the charge into a 21st century economy—one build on increased productivity. 

Manufacturing jobs receive special treatment in the State of the Union because blue-collar workers, who have these jobs, are an important political block. But the main contributors to this increased productivity have been technological innovations. Improved machines do not increase unemployment. Rather they serve to increase productivity and free workers to apply their skills elsewhere. Some people may be temporarily displaced from work, but job opportunities expand as the economy grows. 

Government should stay out of industrial policy, as alternative energy grants and loans have taught us. The best way to promote economic prosperity is to encourage entrepreneurship, the kind observed in Silicon Valley. Many companies in Silicon Valley highlight the true nature of entrepreneurship and progress. This is one reason why these companies produce well-paying service jobs rather than manufacturing jobs.

Government cannot dictate an industry’s growth. Innovation arises through trial and error, success and failure. Individuals must be free to experiment and put to their unique knowledge to use. 

No government bureaucrat could have foreseen the economic effect of the iPad. Seven years ago there was no such thing as an iPhone, and tablets were impractical. In the same way, no federal special business development funds will plot the rise of the next transformative technology.

The President should have stressed cutting the regulatory red tape that reduces entrepreneurship. This, not government-created manufacturing jobs, is the real path to economic growth.

Jared Meyer is a policy analyst at Economics21, a center of the Manhattan Institute. You can follow him on Twitter here.