foxex: The U.S. Origins of Labor Day

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Photo of Women' Suffragette marchers in New York, 2013 courtesy Library of Congress

It's Labor Day here in the U.S., and most people, including us, have the day off. The stock and bond markets are closed in the U.S. For many, Labor Day is the unofficial end of the summer. Officially however, Labor Day commemorates something far more important.

Here is a little backstory of the origins of Labor Day here in America, and a couple of charts on the state of labor and income around the world today.

Origins of Labor Day
The first Labor Day celebration was held by the Central Labor Union on September 5, 1882, in New York City. Who exactly deserves credit for the idea is not clear, but he probably had an ancestor in Ireland named Mag Uidhir. Some argue that the machinist Matthew Maguire first proposed the idea, others that it was the carpenter and American Federation of Labor co-founder Peter McGuire.

Either way the idea caught on, and within a couple of years industrial cities across the country were holding late-summer parades to commemorate the labor movement. Oregon became the first state to make it a public holiday in 1887, and by the time it became a federal holiday in 1894, 29 other states had officially adopted the celebration.

What Were They Protesting?
First, let's look at labor itself. According to MIT's Dora Costa, the average worker in the 1890s worked six 10-hour days per week. Conditions, particularly in industries such as mining, could be grim. The pay was paltry. Attempts to organize were met with hostility and occasionally violence by bosses and governments.

Rail Workers Strike
In 1886, just before Labor Day gained its first official recognition in Oregon, 200,000 Union Pacific and Missouri Pacific railroad workers went on strike in Arkansas, Illinois, Kansas, Missouri, and Texas. The railroads' owner, Jay Gould, was the ninth-richest American ever to live, according to Michael Klepper and Robert Gunther. Based on share of gross national product (GNP), he owned the equivalent of $67 billion in 2007 dollars. Clashes with strikebreakers and sabotage accelerated as the strike stretched on for weeks, and several workers were shot in separate incidents.

On May 4, the day the strike was called off, when someone threw dynamite at officers who were trying to disperse a demonstration for the eight-hour work day in Chicago. The Haymarket riot, as the incident is called, saw 11 killed, seven of them policemen.

Workers leave the Pullman Palace Car Works, 1893. Photo courtesy wikcommons

The Pullman Strike

Labor Day became a national holiday in response to the Pullman Strike, which began in May 1894. The wildcat strike came in reaction to the abuses of the industrialist George Pullman, who housed his workers in a company town he intended to be a utopian community. Workers lived in company-owned housing, paying rent—they were not allowed to buy their homes—and utility bills to the company. Alcohol was prohibited. When a depression hit the U.S. economy in 1893, Pullman laid off hundreds of workers and cut pay, but did not lower rent. When the workers struck, he would not negotiate.

The strike spread to other railroad workers, causing commerce to grind to a halt. President Grover Cleveland obtained a court injunction to stop the strike, based in part on the fact that railroads carried the mail. (He reportedly said, "If it takes the entire army and navy of the United States to deliver a postcard in Chicago, that card will be delivered.") Strikers ignored the order. Federal troops were dispatched to break the strike, and 30 workers died in subsequent clashes; 57 were injured.

The establishment of Labor Day did not put a stop to conflicts between workers and bosses. The Lattimer massacre, in which 19 miners were killed by a Pennsylvania sheriff's posse, followed three years later.

Demand for Better Wages

Company owners began to accept that workers' demand for better treatment was legitimate in the 20th century. In 1914, Henry Ford more than doubled wages to $5. When his profits doubled over two years, rivals realized he might be onto something. In 1926, he cut workers' hours from nine to eight. New Deal legislation would lock in 40-hour weeks for many workers, with overtime pay mandated for longer shifts. By the 1940s, according to Costa, the average workweek had fallen to five 8-hour days. Today, in a reversal of the old arrangement, it's even lower for lower-skilled laborers—not always by choice—while white-collar workers put in longer weeks.

Labor disputes continue today but workers' lives generally improved in the 21st century, and it's worth reflecting on how history got to that point.

Average Annual Wages by Country: 2019

This chart, courtesy of the OECD, shows average wages in developed countries around the world as of the end of 2019. Keep in mind, the COVID-19 pandemic has disrupted economies all over the world, so the numbers may look very different today.

Zoom in or visit the OECD site to use the interactive tool. It's fascinating.

Highest/Lowest GDP Per Capita: 2019

The World Bank's chart of the highest and lowest per capita GDP shows the average per capita contribution made by individuals in each developed country. Zoom in to see each country and the range of per capita GDP contribution, or better yet, visit the World Bank's site to use its interactive tool that allows you to scroll over each country for more detail.