America’s Labor Market: Low Spirits on Labor Day

The historical beginnings of “Labor Day” in the United States are unclear to this day. One possible origination has been attributed to Peter McGuire, the founder of the United Brotherhood of Carpenters and Joiners, as the first to propose the creation of a day to honor laborers toward the end of the 19th century. However, there are also indications that the initiative for the inaugural Labor Day in September 1882 came from Matthew Maguiere, the then secretary of the “Central Labor Union” in New York. In any case, it did not take long before various U.S. states and then also Congress in Washington decided to designate the first Monday in September a holiday.

Despite the more than 100 year old tradition, the American “Labor Day” has long had a meaning differing from the May Day holiday in other countries, particularly Germany. This may be due to the unions, whose power and influence are relatively low. In past years, employee organizations in the United States have lost importance, in part because they do not understand and have not been able to convince workers of the benefits of membership, but also because of company policies of unlawful intimidation of union-friendly employees are often tolerated.

Given the impact of the severe financial crisis, the number of union members has increased slightly for the first time in a long while; a change for the better, or even a rosy future for the workers’ movement has not yet been detected. The events that the union organization AFL-CIO (American Federation of Labor and Congress of Industrial Organizations) and various other unions have again organized on this Monday include the general public, though, for most, it has no meaning. For most Americans, the holiday’s importance lies in the long weekend, as it marks the unofficial end of summer.

Job Reductions Have Slowed

Here, the job market is anything but well. Almost 15 million able-bodied workers are currently reported to be unemployed, almost twice as many as at the beginning of the recession in December 2007. The unemployment rate stands at 9.7 percent and has reached its highest point since the beginning of the 1980s. The hardest hit are those in manufacturing, which includes the troubled auto industry. During the crisis, about 2 million positions were lost in this industry, or approximately 14 percent of all jobs. The situation is also grim in the construction industry, which greatly profited during the upswing in the housing market, with 1.4 million layoffs, or a fifth of all workers. Since the beginning of the year, the outlook has somewhat improved, but only insofar as the pace of redundancies has slowed.

Forecasts that it will be next year before a balance between job gains and losses will be achieved are quite realistic. The economic upturn must first gain strength so that companies will no longer be able to handle new business with only the remaining staff to work the longer hours. Additional jobs will be created, especially when companies begin investing again. For that to happen, loans must be available.

Demands for an additional multi-billion dollar recovery plan, as proposed by union members, are nevertheless misguided. The majority of the current $787 billion package has not yet been distributed. Moreover, this needs to be a time during which the federal budget deficit has not reached dizzying heights and the national debt ceases to climb, so that further steps are not taken into the debt quagmire. Efforts by the Federal Reserve and the Treasury to resolve the obstructions to the credit flow are necessary and correct. The more money the government borrows from the capital markets, the less capital is available for private investment.

No Reason for Pessimism

This Labor Day, however, there is no reason for pessimism. Recovery without an increase in employment is nothing to fear this time. In the foreseeable future, fewer people in the auto and banking industries will find employment than before the crisis; in other industries, however, the demand for qualified and properly paid staff will increase, be it in development and the use of modern techniques for energy, or in health care. In the event that President Barack Obama succeeds in advancing climate change and enacts a budget-neutral health care reform, additional economic stimulation is expected.

America’s workers do not need another short-lived economic stimulus package. Shifts in the budget to benefit educational investment and the promotion of equal opportunity will help them more. More than enough empirical evidence exists in America to support the strong correlation between educational achievement and income level.