Labor Day and Struggling Levels of Entrepreneurship

By at 31 August, 2017, 11:47 am

by Raymond J. Keating-

Mention Labor Day, and people tend to think about either the unofficial end-of-summer three-day weekend, or a symbol of the labor union movement. Most workers, however, are not celebrating labor unions on Labor Day. At SBE Council we believe it is important to celebrate all human capital, especially the entrepreneurs who drive economic and employment growth.

Regarding the three-day weekend, I hope all enjoy it with friends and family.

The History of Labor Day

As for labor unions, it’s time to get a couple of things straight. First, let’s understand the politics behind the start of Labor Day. In 2013, I explained the following in a Long Island Business News column:

As for the origins of Labor Day, the quick, sanitized version is that labor unions began their own celebration with a parade in New York City in September 1882. The idea spread, with various states subsequently marking a “workingmen’s holiday.” Finally, in 1894, Congress passed and President Grover Cleveland, a Democrat, signed into law a bill declaring the first Monday in September a national holiday. Hence, Labor Day was born.

Left out is the politics. With the economy taking a big nosedive in 1893, the Pullman Palace Car Company, manufacturer and operator of railroad sleeping cars, reduced wages. Workers went on strike on May 11, 1894. Boycotts and sympathy strikes spread, with much of the nation’s railway traffic grinding to a halt.

President Cleveland, a conservative Democrat, and Congress offered the Labor Day bill as a sop to divide the labor movement. Cleveland was getting set to move against the Pullman strike. Four days after the Labor Day bill was signed into law, the attorney general got a federal injunction to stop activities hindering mail delivery and interstate commerce. Then, on July 4, Cleveland sent federal troops into the Chicago area to end the strike.

The labor union movement waned considerably after this, until the Great Depression. So, ironically, Labor Day was a political tool used to help squash the most radical and activist parts of the labor union movement.

Labor Union Membership Has Plummeted

Second, labor unions in the private sector today are effectively inconsequential. While 24.2 percent of private sector workers were union members in 1973, according to, that share plummeted to a mere 6.4 percent in 2016. Over that period, while total employment has nearly doubled, the number of union members has been cut in half.

Let’s Celebrate All Human Capital

If we’re willing to put aside politics, and get serious about what actually benefits American workers, then Labor Day should be a combined salute to workers and entrepreneurs. After all, our economy is not about some politically-conjured-up fiction regarding a conflict between labor and business owners. Instead, free enterprise is about labor and capital, if you will, working together.

Indeed, workers thrive when private sector entrepreneurs and investors are forging ahead with investment, innovation and efficiency gains. This should be obvious as workers need the jobs created by all kinds of businesses, as well as the investments in tools, equipment, technology, facilities, and assorted innovations that enhance productivity. Increased productivity, of course, translates into higher incomes for workers.

Waning Entrepreneurship

American workers should not be concerned about the decline of private sector labor union membership (and they do not seem to be), but instead the decline in entrepreneurship in the U.S. economy.

As noted in SBE Council’s recent analysis of the daunting gap in entrepreneurship, looking at self-employed and employer firm data, the U.S. is effectively missing some 3.4 million businesses, compared to where we should be based on historical norms as a share of the population. That’s also likely a conservative estimate.

For good measure, according to the most recent data from the U.S. Bureau of Labor Statistics, the number of unincorporated self-employed declined rather notably from December 2016 to July 2017.

The July level of 9.183 million (seasonally adjusted) was the lowest since July 2014, and remained off markedly from the pre-recession high of 10.9 million in April 2005. For good measure, the number of incorporated self-employed in 2017 remain down from 2008 levels. And as shares of the relevant population, unincorporated and unincorporated self-employed remain down significantly.

If the labor union movement – which has lost membership but sustains political power – were to deal with economic reality, then it would be leading the way along with small business for an agenda of tax and regulatory relief and reform that would enhance incentives for entrepreneurship, private investment, and quality job creation for America’s workforce.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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