What to Watch on Jobs Day: A stronger economy for American workers for Labor Day

Labor Day is a celebration of the labor movement and the contributions working people make to the economy and the country. Today’s unions give workers across the economy the power to improve their jobs; through collective bargaining, working people gain a voice at work and the power to shape their working lives. As we illustrated in a recent research report, unions are associated with higher wages and benefits for workers of all genders, races, and ethnicities, better health and safety practices in a variety of sectors, and lower levels of economic inequality across the economy. Unfortunately, aggressive anti-collective bargaining campaigns and lobbying have eroded union membership, thwarting the ability for workers to organize.

Without stronger collective bargaining—and stronger labor standards in general—it is only in the tightest of labor markets that the vast majority of workers see their wages grow and their working conditions improve. Without strong unions, one of the only ways workers have leverage in the labor market is when workers have good “outside options,” i.e. when business have to woo workers rather than workers having to compete for scarce job openings. And unfortunately, that has not been the case for many years.

Overall, the economy has been steadily improving, but the current unemployment rate is undercounting the level of slack in the economy. For several months, year-over-year nominal wage growth has held at around 2.5 percent—below the target rate of 3.5 percent. This rate of growth is evidence that employers don’t need to do much to attract and retain the workers they want. Any significant signs of labor shortages are simply not showing up in the data. And at historically similar unemployment rates, the prime-age employment-to-population ratio tends to be significantly higher. Taken with the aforementioned underperforming wage growth, this suggests the labor market still hasn’t reached genuine full employment.

Hopefully, the Federal Reserve will get the message that there are still no worrying signs of inflationary pressure from wage growth, and keep their foot off the brakes to let the economy full recover. Policymakers could also do a better job of supporting workers’ right to collectively bargain. It shouldn’t have to be in only the best of times that workers see decent wage growth. Growing productivity and a growing economy can be broadly shared. Labor Day shouldn’t be the only day of the year when we prioritize the needs of working Americans.