Labor Day Economics

Aug 25, 2015

Labor Day signifies the end of summer, fabulous sales, and the last day of the year to wear white. But the meaning of Labor Day is historically much greater. Labor Day was first celebrated in the late 19th century in New York City as a tribute to the achievements of all American workers. During this period of the Industrial Revolution, labor unions became increasingly prevalent as a way to combat poor working conditions. To do so, workers organized strikes and rallies. On September 5th, 1882, the Central Labor Union brought together 10,000 workers to take unpaid time off to march together, marking the first Labor Day parade. Here, we look at a key economic concept surrounding the celebration of Labor Day – the economics of labor unions.

A labor union is an organization formed to represent the collective interests of workers in terms of wages, hours, benefits, and working conditions through collective bargaining with employers. This is accomplished through creating bargaining units, which are groups of workers of certain positions or job titles that belong to unions. Union leaders then represent these units in negotiating with employers to create collective bargaining agreements that determine specific conditions of employment, such as pay, shift length, and sick leave, which apply to workers within their bargaining units.

Historic unions, such as the Knights of Labor and the American Federation of Labor, are credited with making great strides to eliminate child labor, implement eight-hour work days, and improve workplace safety. However, the history of labor unions is also marked by controversy from various union events that turned violent. During the 1886 Haymarket Riot in Chicago, a bomb exploded as police moved to disperse a labor meeting, leading to the deaths of both police and civilians. This event is commemorated on May Day, now also called International Worker’s Day, which is celebrated around the world on May 1.

Today, there are still many well-known unions today, including the Screen Actors Guild, the United Auto Workers, and the American Postal Workers Union. However, unions have declined in prevalence. In 1964, nearly one-third of American workers belonged to a union. As of 2014, membership was only about one-tenth of workers – although these statistics do vary by state and industry. For example, cultural differences may play a role in a state’s union membership rates, with the South being the least-unionized region in the US, perhaps due to less favorable views of unions, as well as laws that prohibit specific types of collective bargaining. Meanwhile, New York and Alaska have the highest rates of union workers. Industry can also vary in union membership. For instance, 36% of government employees belong to unions, but only 7% of private sector employees belong to unions.

So as you enjoy your Labor Day weekend, remember the economic issues and concepts at hand that led to the creation of current labor practices…and the holiday.

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