The rush to attract manufacturing jobs coming back from outside the U.S. as a result of the pandemic is a natural reaction by state economic developers. Nothing wrong with that. But the real competition for high-tech manufacturing jobs lies in how the states compete among themselves to retain the manufacturing bases they already have.

Virtually the entire U.S. manufacturing industry strives toward a future that depends ever more heavily on robotics, AI-enabled infrastructure and IoT to produce the trillions of parts and artifacts with the precision and speed demanded by their customers. At the same time, most state economic development policies are focused on subsidizing incremental headcount in manufacturing facilities. As usual, government policy is backward-looking, having been devised for a 20th century reality that no longer exists.

The states that will win the tug-of-war for the U.S. manufacturing base will be those that contribute most to the retooling and retraining that manufacturers will be undertaking to remain cost-competitive internationally. This is not to say states shouldn’t reward companies that are adding jobs. Rather, they all need to broaden their definition of economic development to include retention.

Policies that increase the after-tax ROI of a comprehensive plant retooling should be incentivized, regardless of the fact that some lower-skilled positions may be lost.

The choice for State Economic Developers is no longer between more manufacturing jobs versus fewer; but rather, fewer manufacturing jobs as technology raises productivity, versus no manufacturing jobs, as the business relocates to take advantage of lower total costs in a different state.

Michael Press is the former U.S. Practice Leader of the Ernst & Young Business Incentives Advisory Group, and former Chief Economist for the City of New York.