A common misperception about Labor Day is we all get the day off.
Labor Day is a U.S. national holiday held the first Monday every September. Unlike most U.S. holidays, it is a strange celebration without rituals, except for shopping and barbecuing. For most people it simply marks the last weekend of summer and the start of the school year.
https://www.madrimasd.org/blogs/astrofisica/2020/05/26/134641
The holiday’s founders in the late 1800s envisioned something very different from what the day has become. The founders were looking for two things: a means of unifying union workers and a reduction in work time.
History of Labor Day
The first Labor Day occurred in 1882 in New York City under the direction of that city’s Central Labor Union.
https://blogs.dickinson.edu/outing-club/2014/09/16/916-climbing-at-whiskey-springs/
In the 1800s, unions covered only a small fraction of workers and were balkanized and relatively weak. The goal of organizations like the Central Labor Union and more modern-day counterparts like the AFL-CIO was to bring many small unions together to achieve a critical mass and power. The organizers of the first Labor Day were interested in creating an event that brought different types of workers together to meet each other and recognize their common interests.
However, the organizers had a large problem: No government or company recognized the first Monday in September as a day off work. The issue was solved temporarily by declaring a one-day strike in the city. All striking workers were expected to march in a parade and then eat and drink at a giant picnic afterwards.
http://cgi.www5e.biglobe.ne.jp/~manbow/lineage2/diary/anii/diary.cgi?mode=res&no=6
The New York Tribune’s reporter covering the event felt the entire day was like one long political barbecue, with “rather dull speeches.”
Why was Labor Day invented?
Labor Day came about because workers felt they were spending too many hours and days on the job.
https://www.madrimasd.org/blogs/astrofisica/2021/02/23/134788
In the 1830s, manufacturing workers were putting in 70-hour weeks on average. Sixty years later, in 1890, hours of work had dropped, although the average manufacturing worker still toiled in a factory 60 hours a week.
These long working hours caused many union organizers to focus on winning a shorter eight-hour work day. They also focused on getting workers more days off, such as the Labor Day holiday, and reducing the workweek to just six days.
https://u.osu.edu/zagorsky.1/2014/12/29/bankofjapan/
These early organizers clearly won since the most recent data show that the average person working in manufacturing is employed for a bit over 40 hours a week and most people work only five days a week.
Surprisingly, many politicians and business owners were actually in favor of giving workers more time off. That’s because workers who had no free time were not able to spend their wages on traveling, entertainment or dining out.
As the U.S. economy expanded beyond farming and basic manufacturing in the late 1800s and early 1900s, it became important for businesses to find consumers interested in buying the products and services being produced in ever greater amounts. Shortening the work week was one way of turning the working class into the consuming class.
https://blogs.dickinson.edu/outing-club/2014/09/22/928-ropes-course/
Common misconceptions
The common misconception is that since Labor Day is a national holiday, everyone gets the day off. Nothing could be further from the truth.
While the first Labor Day was created by striking, the idea of a special holiday for workers was easy for politicians to support. It was easy because proclaiming a holiday, like Mother’s Day, costs legislators nothing and benefits them by currying favor with voters. In 1887, Oregon, Colorado, Massachusetts, New York and New Jersey all declared a special legal holiday in September to celebrate workers.
http://blogs.cae.tntech.edu/jwlangston21/fpga-development/
Within 12 years, half the states in the country recognized Labor Day as a holiday. It became a national holiday in June 1894 when President Grover Cleveland signed the Labor Day bill into law. While most people interpreted this as recognizing the day as a national vacation, Congress’ proclamation covers only federal employees. It is up to each state to declare its own legal holidays.
http://cgi.www5e.biglobe.ne.jp/~manbow/lineage2/diary/anii/diary.cgi?mode=res&no=3
Moreover, proclaiming any day an official holiday means little, as an official holiday does not require private employers and even some government agencies to give their workers the day off. Many stores are open on Labor Day. Essential government services in protection and transportation continue to function, and even less essential programs like national parks are open. Because not everyone is given time off on Labor Day, union workers as recently as the 1930s were being urged to stage one-day strikes if their employer refused to give them the day off.
https://thesocietypages.org/socimages/2015/01/22/working-conditions-in-modern-agriculture/
In the president’s annual Labor Day declaration last year, Obama encouraged Americans “to observe this day with appropriate programs, ceremonies and activities that honor the contributions and resilience of working Americans.”
The proclamation, however, does not officially declare that anyone gets time off.
Controversy: Militants and founders
Today most people in the U.S. think of Labor Day as a noncontroversial holiday.
https://www.madrimasd.org/blogs/astrofisica/2021/02/15/134748
There is no family drama like at Thanksgiving, no religious issues like at Christmas. However, 100 years ago there was controversy.
The first controversy that people fought over was how militant workers should act on a day designed to honor workers. Communist, Marxist and socialist members of the trade union movement supported May 1 as an international day of demonstrations, street protests and even violence, which continues even today.
https://blocs.xtec.cat/elblocdelafrancina/2007/11/07/hola/comment-page-3/
More moderate trade union members, however, advocated for a September Labor Day of parades and picnics. In the U.S., picnics, instead of street protests, won the day.
There is also dispute over who suggested the idea. The earliest history from the mid-1930s credits Peter J. McGuire, who founded the New York City Brotherhood of Carpenters and Joiners, in 1881 with suggesting a date that would fall “nearly midway between the Fourth of July and Thanksgiving” that “would publicly show the strength and esprit de corps of the trade and labor organizations.”
https://u.osu.edu/zagorsky.1/2014/06/03/tv-on-united-airlines/
Later scholarship from the early 1970s makes an excellent case that Matthew Maguire, a representative from the Machinists Union, actually was the founder of Labor Day. However, because Matthew Maguire was seen as too radical, the more moderate Peter McGuire was given the credit.
Who actually came up with the idea will likely never be known, but you can vote online here to express your view.
https://u.osu.edu/zagorsky.1/2014/12/02/byob/
Have we lost the spirit of Labor Day?
Today Labor Day is no longer about trade unionists marching down the street with banners and their tools of trade. Instead, it is a confused holiday with no associated rituals.
The original holiday was meant to handle a problem of long working hours and no time off. Although the battle over these issues would seem to have been won long ago, this issue is starting to come back with a vengeance, not for manufacturing workers but for highly skilled white-collar workers, many of whom are constantly connected to work.
http://cgi.www5e.biglobe.ne.jp/~manbow/lineage2/diary/anii/diary.cgi?mode=res&no=5
If you work all the time and never really take a vacation, start a new ritual that honors the original spirit of Labor Day. Give yourself the day off. Don’t go in to work. Shut off your phone, computer and other electronic devices connecting you to your daily grind. Then go to a barbecue, like the original participants did over a century ago, and celebrate having at least one day off from work during the year!
A top-level committee of the Federal Reserve, the US’ central bank, is meeting this week to discuss when it should begin raising interest rates. Why do stock prices fall when a country’s central bank boosts interest rates?
https://blogs.dickinson.edu/outing-club/2014/09/23/926-climbing/
Often when a central bank lifts rates, the country’s stock market falls. When the central bank cuts them, share prices go up. Typically this occurs well in advance of the actual change because investors are making bets on what they think will happen. And sometimes this seems counterintuitive, because a central bank usually raises rates when an economy is strengthening and lowers them when it’s weaker.
https://thesocietypages.org/socimages/2015/06/12/animal-cultures/
For example, at the end of July, the Standard & Poor’s 500 plunged 2% after a report signaling an improving US economy convinced traders the Fed was more likely to raise its target interest rate sooner rather than later. The same thing has played out repeatedly this year – stocks rising on signs the Fed will keep rates at about zero; shares sliding when it appears the central bank will raise them.
Why does the stock market react like this? The answer is because of an idea called “present value.”
https://stevenpressfield.com/2021/06/the-understory-in-lawrence-of-arabia/
What’s in a share
The value of a company’s shares is based on its profits, which are the difference between a company’s earnings or revenue and its costs. For example, if the Professor JayZ Company is able to sell US$10 million of products and it costs the company $7 million to make and distribute them, then the profits are $3 million.
Let’s start off simply and assume that after earning $3 million, the company distributes all profits to shareholders and then closes down. Let’s also make another simple assumption that there is just one share of stock available. This means whoever owns the single share gets the entire $3 million profit.
If the price for the single share was $1,000, everyone would definitely want to buy the stock because anyone getting the share would earn almost $3 million from the trade. Even at $1 million, we’d all still want to buy the stock because the trade still results in a tidy gain of $2 million.
https://u.osu.edu/zagorsky.1/2014/06/23/fleecities/
If there was an efficient stock market with good information available to all traders, the share price would eventually rise toward $3 million. No trader would pay more than $3 million, because above that level, he or she would lose money. In this very simple world, the price of the share of stock is simply the company’s profits.
Now, in real life, few companies exist just for a single year and then close. Instead, the vast majority exist for many years. What happens if the Professor JayZ Company exists for two years and each year earns $3 million in profits?
http://cgi.www5e.biglobe.ne.jp/~manbow/lineage2/diary/anii/diary.cgi?mode=res&no=8
Clearly people are willing to bid more for the stock now since they will be getting a larger amount of money. However, they will have to wait some time before getting all their money, so they wouldn’t want to pay $6 million. Forcing people to wait has a cost, since traders pay for the stock today and then get the profits or dividends later.
Waiting is a problem because money received in the future is not worth as much as today. The simplest way to see this is to imagine winning a million dollars today. How would your excitement change if you still won that million dollars, but the prize money wouldn’t arrive for 25 years? Most people are much less interested, because a lot can happen in 25 years. Having to wait makes the prize less valuable.
https://u.osu.edu/zagorsky.1/2014/12/08/holidaysales/
How present value works
A math formula called “present value” (a good calculator is here, web page here, video here, book here) shows exactly how much less valuable money received in the future is compared with money received today.
The idea behind the formula is simple: present value is the amount of money someone would accept today instead of getting some larger amount in the future.
https://blocs.xtec.cat/elblocdelafrancina/2008/02/15/lluis-cartes-camina-descalc/comment-page-3/
For example, if the interest rate is 5% and a person is expecting a $3 million profit from the JayZ Company in one year, then the present value is close to $2.86 million. Why $2.86 million? This is the amount of money that, when put in a bank with 5% interest, grows to $3 million one year from now.
However, if interest rates rise to 10%, the present value is only $2.73 million. A smaller amount needs to be put in a bank because the higher rate produces more interest.
When interest rates rise from 5% to 10%, investors value the profits earned one year from now by the JayZ company much less and are not willing to pay as much for the outstanding share of stock. When interest rates go up, share prices fall because the present value of profits earned in future years is lower. Future profits are lower because investors can put smaller amounts in the bank to earn a targeted amount.
The present value formula provides very precise estimates of what stocks are worth when interest rates are known. However, no one is able to accurately predict future interest rates. This means some traders are using high interest rates to calculate the present value of profits, while others are using low rates. As people change their expectations of future rates, stocks often move wildly.
http://cgi.www5e.biglobe.ne.jp/~manbow/lineage2/diary/anii/diary.cgi?mode=res&no=4
Interest rates and profits
Beyond their importance in calculating present value, interest rates have another important impact on stock prices. Many companies borrow heavily to finance their activities.
Much corporate borrowing is not at fixed interest rates but instead at rates that change based on market conditions (floating rates). If the market interest rate goes up, then these borrowers pay more interest. Increases in interest rates mean costs rise, profits fall and share prices are reduced. Conversely, when interest rates fall, many companies report higher profits without changing any other aspect of their business, boosting their share price.
In general, stock prices are inversely related to interest rates. If everything else stays constant and you believe interest rates will rise, sell stocks now. If you believe interest rates will fall, buy stocks now.
Unfortunately, since it is difficult to accurately forecast future interest rates and all the other factors that are changing simultaneously in financial markets, this algorithm by itself will not make you instantly rich. And this week’s decision by the Fed could go either way because there is broad disagreement about whether the economy is strong enough to handle a rate hike – among many other factors influencing its decision.
https://u.osu.edu/zagorsky.1/2014/08/18/japantaxes/
Nevertheless, understanding how interest rates or expectations about future interest rates affect the value of stocks is useful because it explains why the stock market changes dramatically when central banks adjust their interest rate policies.
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