I tried to hit on a few different ways of looking at this
I disagree with the premise of a shrinking middle class. Globally, it's rapidly expanding. The US and western Europe had a leg up for a long time due to regional expansion of industrialization pre-WW2. Post-WW2, US was far ahead of the rest due to the destruction of factories in all other modern states and by being a mass creditor to those states' rebuilding. This allowed Europe (mainly Germany) and Japan to become industrial pioneers in high tech and top quality. The US was complacent in its position as top dog. Then Japan became complacent in its position as tech top dog. Germany hasn't become complacent, because, well, that's just how Germans are, I guess. This complacency was combined with an increase in competition by countries playing catchup. This competition simply reduces the demand for US manufacturing.
Another way of looking at this is the educational direction of the US has created a greater number of anti-education people while also vilifying manufacturing. Mike Rowe talks a lot about this. He's not an economist, but he makes an incredibly important point. We have become enamored with the concept of greatness. We all go to college to become quasi-intellectuals who never learned or appreciated a dirty job. There's a shitload of money to be made in middle-tier jobs as mechanics, machinists, and all sorts of what we call grunt work, but nobody wants to do it because we think it's beneath us. We think that progress into the new age is a shunning of the trades. Additionally, it's anti-intellectualism, where to many, it's totally cool to not know wtf you're doing. Read at an 8th grade level? Doesn't matter, still graduating. But oh wait now I can't get a job and potential manufacturing firms aren't even building plants around here because it couldn't find workers that can follow instructions and think critically.
Another issue, which may be vastly underrepresented, is the increase of women in the workforce. For a variety of reasons, women gravitate towards the service sector and not towards the manufacturing sector, and this makes a very healthy manufacturing sector look sick. In all honesty, I think this is the real factor. US manufacturing is far better than people think. Every sector is better than people think. Every sector is the best in the world, actually. Farming and resource extraction is the best, manufacturing is still huge, service is the best by far, and tech is the best by far.
Regardless, it's just not popular or easy to become a manufacturer. The people who get into it are mainly just the ones who are born into the culture. They're the people who never developed fantasies about going off to college and writing books or becoming CEOs. And colleges have completely dropped the ball on incorporating into the workforce. We need a vast expansion of private industry working with colleges on job programs. Notice that college courses are all CHEM, POLS, HIST, etc. There's no MACHINIST accreditation. This is largely because colleges are still using the old medieval model of higher education revolving around a broad intellectual scholasticism.
Manufacturing expanded rapidly in this country when there was a romance to it. Now there is no romance to it. People always talk about it, but it's funny that everybody who talks about it aren't people who actually want to do it. There's a shitload of money in it, but you have to get greasy and abandon your dreams of grandeur to do it
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