Why We Celebrate Labor Day Has Never Been More Relevant

9/4 Labor Day Jobs America
Chris Martin marches with Local 5285 in a Labor Day Parade in Charlotte, North Carolina in September 2012. The Second Gilded Age has brought levels of inequality not seen since labor unions first organized, the author writes. Jessica Rinaldi/Reuters

This Labor Day weekend finds the United States confronted by many troubling and contentious questions related to workers and the economy. These questions range from the minimum wage to paid family leave, from collective bargaining rights for public sector workers to the Trans-Pacific Partnership trade agreement.

Linking these seemingly disparate questions is their connection to the broader question of rising wealth inequality in American society. So acute has this problem grown in recent years that many social commentators have taken to referring to our era as a Second Gilded Age.

This phrase represents more than a clever rhetorical flourish, for the original Gilded Age (1870-1900) was rocked by many of the same questions that challenge the U.S. today, especially the problem of increasing wealth inequality. In fact, it was in the midst of this turmoil that American workers established Labor Day.

The first Labor Day occurred in New York City on September 5, 1882. The original parade drew about 5,000 workers and the idea rapidly caught on across the country, eventually leading to its establishment as a national holiday.

What was the motivation behind the establishment of Labor Day? One detail from the original commemoration in 1882 provides a hint: a sign carried in the parade proclaiming a simple yet profound message: All Men Are Born Equal. What was happening in American society in 1882—over a century after Thomas Jefferson made a similar bold claim in the Declaration of Independence—that would compel a worker to make such a sign?

The answer is rapid and intensive industrialization. This process transformed the United States into the world's leading economic power by 1900. But it also brought with it widespread poverty.

Evidence of this troubling duality could be found everywhere, but especially in New York City, where mansions of big business tycoons like Cornelius Vanderbilt, J.P. Morgan and Andrew Carnegie arose along Fifth Avenue, while in the rest of the city two-thirds of the population lived in cramped and squalid tenements. In short, the establishment of Labor Day signaled that Gilded Age America faced a crisis over growing inequality.

Americans in the first Gilded Age responded to this crisis of inequality by forming unions and staging strikes—an astonishing 37,000 strikes between 1880 and 1900. But they also developed and popularized a key insight regarding republican citizenship: that political equality (one vote) was no longer adequate to maintain a healthy republican society.

Modern industrial life, with huge corporations, global markets and increasing numbers of people working for wages, made it clear that republican citizenship included an economic dimension. As the reformer and labor activist Henry George wrote in 1879, "In our time…creep on the insidious forces that, producing inequality, destroy Liberty."

If one was overworked and yet unable to earn a living wage, argued George and other reformers, his right to vote was meaningless. He had sunk into "industrial slavery." Extreme inequality, in other words, would destroy American democracy.

Motivated by this insight, the labor movement and social reformers in the 20th century pushed for policies aimed at limiting the power of big corporations and the wealthy while protecting and enhancing the opportunity for the average citizen to live a decent life. These policies included the eight-hour day, increased workplace safety, collective bargaining rights, income taxes, unemployment insurance and Social Security.

Their success reflected a growing acceptance of the idea that for republican citizenship to be real, it had to include a baseline of material wellbeing. By the 1930s, President Franklin D. Roosevelt enshrined "Freedom from Want" as one of the nation's four essential freedoms. "True individual freedom," he said, "cannot exist without economic security and independence."

Political leaders like Roosevelt, along with a strong labor movement, combined to boost the wellbeing of the average American. The result? Extreme wealth inequality decreased steadily. Whereas in 1890 the top 1 percent of Americans owned 51 percent of all wealth, by 1979 the 1 percent owned 20.5 percent of all wealth.

But since 1980, a weakened labor movement and changes to the tax code (among other things) have resulted in a dramatic shift back toward increased wealth and income inequality. By 2010, the top 1 percent's share of all wealth stood at 35.4 percent—and rising.

So this weekend, as millions celebrate Labor Day by refraining from labor, Americans would do well to reflect on the core claims of the early labor movement: that the nation's democratic values and republican institutions are threatened by economic policies that leave a small number extremely wealthy and powerful and the majority struggling to attain or hold onto a piece of the American Dream.

Labor Day reminds us that while we all are created equal, we also grow up to live in a society shaped by policies and laws that determine whether opportunities for success are focused on the great majority of citizens or merely on the 1 percent.

Edward T. O'Donnell is an associate professor of history at the College of the Holy Cross in Worcester, Massachusetts and the author of Henry George and the Crisis of Inequality: Progress and Poverty in the Gilded Age (Columbia University Press).