1. Manufacturing is dynamic
The role of manufacturing in any economy isn't static. By providing the tools to raise agricultural productivity, build critical infrastructure, and lift populations out of rural poverty, manufacturing remains the clear path to economic development. But once countries climb from developing to middle-income status (around $10,000 in GDP per capita), their economies become more diverse. At later stages of development, more consumers can afford to spend money on services, making that sector the fastest-growing sector in the economy.
Moreover, as wages rise, manufacturers must increase productivity in order to sustain their profits. As a result, manufacturing's share of GDP peaks at 20 to 35 percent in middle-income countries and then falls, following an inverted U curve. Today, manufacturing represents 12 percent of GDP in the United States, 18 percent in Germany, and 33 percent in China.
As they recover from the Great Recession, some advanced economies may see a rebound in hiring in manufacturing. Some might even see moderate export gains. But because of continuing improvements in productivity, the faster growth of service sectors, and the focus on higher-skilled jobs, manufacturing's share of overall employment will remain under pressure.