Labor Day was first celebrated nationally in 1882. It came into existence amidst an era of rapid industrialization and urbanization. Designed specifically to herald and thank the working man (and by the mid-20th century the working woman), parades and union rallies were common features of the holiday in the late 19th and early 20th centuries.
Labor Day also came into being in a milieu of revolutionary politics. Urban uprisings dating back to the mid-19th century in Europe prompted labor organization in most industrializing nations and fueled socialist parties around the globe. Worker unions made significant gains from the 1880s until about the mid-20th century. The Soviet Revolution of 1917, although occurring in a country that was still largely agrarian, championed the vision of the Stakhanovite factory worker. Class warfare was in the air and the future seemed to belong to the industrial laborer.
Labor Day Today
Fast forward to the early 21st century.
Although workers in industrial manufacturing still exist today, they represent a shrinking portion of the total labor force. In 1910, workers in construction, mining, and manufacturing represented roughly 46% of the nonfarm workforce. By 2015, that percentage had dropped to about 14% (see previous link). The service sector, by contrast, went from 38% in 1910 to 77% a century later. The white-collar portion of services (finance, real estate, education, government, and other professional services) jumped from 11% to 53% during the same time frame. And private sector unionization has tumbled since its high point in the 1950s.
The statistics above represent only the non-farm workforce. It is important to remember that agricultural workers, who toiled equally hard as factory employees, comprised a substantially larger number of the total workforce in 1900 (approximately 41%) than today (less than 2%).
While labor historians may attribute our contemporary prosperity to the forces promoting labor rights a century or more ago, the bulk of improved living standards resulted from technological innovations that promoted industrial productivity and freed up people to move into professional service and informational occupations that are quite luxurious by any measure. Air-conditioned offices are more the norm for the typical laborer today than poorly-ventilated textile or steel mills. And factory workers today, who largely manage automated machinery, enjoy conditions that would be envious to a worker just fifty years ago.
Today, the major beneficiaries of the early September three-day weekend are financial advisors, lawyers, accountants, computer programmers, and office managers, all of whom would have been considered part of the white-collar upper class in 1882. (Computer programmers didn’t exist back then, of course, but it was the industrial productivity gains of the 20th century that gave rise to this new labor sector.) For them, Labor Day is celebrated with one last jaunt on the lake or a family vacation to an amusement park before summer turns into the autumn school year. Ironically, these folks will be served in restaurants, hotels, and retail shops by lower-paid service workers who do not get the holiday off.
Labor Day 2021 is not what its proponents would have intended or recognized 139 years earlier.
Is It Time to Rethink (and Rename) Labor Day?
Given the dramatic transformation of our economy since the 1880s, do we need to rethink Labor Day? Might it be more appropriate to use the holiday to celebrate and remind everyone about the underlying factors that led to our current prosperity?
My effort here is not to denigrate labor. Having come from an extended family of blue-collar workers, I maintain a deep appreciation of those who make an hourly wage. But with many successive generations of unionized workers in my background, I have come to understand that the efforts to help labor via unionization often comes at a high, long-term cost (as Pete Earle has pointed out).
But in a world where labor has become so specialized and heterogenous, maybe we should be rethinking what a day to celebrate labor is all about. Perhaps it is time to rename Labor Day.
How about Capitalism Day?
My initial thought was to rebrand Labor Day as “Capitalism Day.” Capitalism, after all, is the economic bedrock on which the United States was built. Freedom-loving folks like myself love to tout the benefits of capitalism. It is capitalism, after all, that brought the Great Enrichment.
Alas, the term “capitalism” is a bit cumbersome and misleading for many folks. It suggests an image that the engine driving economic prosperity is capital, the machinery and pools of financial assets that enable economic production to occur. This, in turn, allows many scholars to co-opt the term and misrepresent its theoretical fundamentals by pointing out that individuals and conglomerates that own such productive assets – i.e., “capitalists” – often engage in harmful social behavior such as the promotion of slavery or anti-competitive regulations.
This forces those of us who appreciate the free market underpinnings of capitalist economies to explain that large (and even small) businesses do not always promote free enterprise; the presence of government and its coercive ability to write laws that reallocate resources tempts individual enterprises to leverage that power against the freedom of others (something that even Adam Smith realized two centuries ago). We derive new terms such as “crony capitalism” to explain this deviation away from free markets. But crony capitalism is not capitalism in its free market sense. Combining “crony” with “capitalism” only obfuscates what is really critical to prosperity – the freedom to voluntarily exchange.
Another problem with the term “capitalism” is that it buys into what I think is a false dichotomy of a world portrayed with “owners” and “workers,” or “employers” and “employees.” This notion tends to reify the argument that Karl Marx made that the “bourgeoisie” was out to exploit the “proletariat.” Such a notion undermines the important symbiosis of what different individuals bring to the production process.
Political economists use the terms “capital” and “labor” to refer to individuals who hold qualitatively different assets needed for economic production. Capitalists have a comparative (and sometimes absolute) advantage in owning physical and financial assets that are needed to make all our stuff and junk. Labor, on the other hand, lacks ownership of machinery, buildings, and pools of money; their comparative advantage is the time and effort they have to put their bodies and minds to good use. And it is important to also recognize that “capital” works; merely having physical and financial assets is useless without the labor that goes into figuring out how to make those resources useful to others.
Capital is useless without labor. Labor is largely useless without capital. They are not at odds with one another, but rather they crucially need each other. This is why celebrating Labor Day without acknowledging capital, or vice versa, only tells half of the important story of prosperity.
Let’s Celebrate Market Freedom Day!
What we need is a holiday that recognizes what really brings about human flourishing – the ability of people with different assets to find one another and exchange what they have to realize the gains from trade. When individuals are allowed to seek and discover others who value what they have to offer, without the coercive interference of others, we all benefit.
And what a great story could be told on that day!
We can celebrate those who toil laboriously, using their hands and minds to create new products and services. Such people include the steel worker on the factory floor and the computer programmer who develops a new algorithm to speed along accounting software. And for the housekeepers who make our beds at vacation hotels, we salute you too because that job is ever so important for the business traveler who needs to be away from home to bring more people together.
We also celebrate those who provide the physical and financial resources for those workers to come together in coordinated union to realize the potential of things they could not do individually. Hooray to the entrepreneur and venture capitalist who see the potential in a daring idea and pool their resources to attract individuals who can help them realize their dream.
When we celebrate market freedom, we end up celebrating all those who participate in the process. From the most humble of bartenders to the wealthiest of bankers, we all matter in what we do for one another. It is the most inclusive way to celebrate the dignity of those who peacefully and productively use their talents to the benefit of others. And dignity, as Deirdre McCloskey reminds us, is the one of the most valuable resources of all.
And so I challenge you to raise a glass to others and wish them the freedom to realize their potential in the service to others.
Happy Market Freedom Day!
This article, Is It Time to Rethink Labor Day?, was originally published by the American Institute for Economic Research and appears here with permission. Please support their efforts.