If the cost of labor increases, someone has to pay for it. Laborers may pay in the form of decreased work opportunities, investors may pay in the form of decreased returns on capital, or consumers may pay in the form of higher prices required by increased costs.
US manufacturing output is still enormous, it has simply been achieved with ever higher levels of capital (e.g. machines) as labor has been made more and more expensive (through minimum wages, benefits, etc. that US corporations are taxed or regulated into providing).