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Isn't it Time for a Free Market Labour Day?

by Patrick Basham & Jason Clemens

Labour Day is considered so important that it's the only non-religious holiday jointly celebrated by the US and Canada. Accordingly, on September 7^th almost every American and Canadian town will be filled with community barbecues, parades, and picnics.

Officially, our two nations take a day off to celebrate the value of labour. However, the historical record reveals that Labour Day isn't an imported European celebration of the working person. Rather, contrary to popular opinion, Labour Day has North American roots; it has evolved as an occasion to pay misguided homage to socialism and its ideological foot soldiers in the trade union movement.

In 1872, the cities of Toronto and Ottawa held the first Canadian parades celebrating organized labour. A decade later, the Knights of Labour organized similar parades and picnics in New York City. It wasn't until 1889 that the Second Socialist International (Paris) selected the May 1^st holiday for labour celebrations in Europe.

Given the recent international demise of socialism, and the subsequent decline in union membership and influence, Americans and Canadians are today presented with an opportunity to redefine their annual celebration of labour. Rather than continue to celebrate the failed legacies of anachronistic unionism and amoral socialism, both countries should undertake to celebrate the true virtues of labour.

Labour is a dynamic process through which individuals add value to raw materials, generate wealth for society, and give form to previously only imagined ideas. At the heart of the labour process is the opportunity for individuals to provide for themselves (and their families) a standard of living based on their own hard work, ingenuity, creativity, and skills.

The importance of these labours to our economy and, to a larger extent, to our society cannot be underestimated. Labour income accounts for 56 percent of America's Gross Domestic Product (GDP) and only slightly less, 53 percent, of Canada's GDP.

Therefore, the new Labour Day celebration should focus on the merits of free-market capitalism. For it is the capitalist system alone that allows individuals the freedom to choose their occupation and the opportunity to apply their skills, invest their savings, invent a product, and maybe even become a millionaire.

But Labour Day should also celebrate individual freedom and choice derived from labour income. By applying one's talents and skills, whether intellectual, physical, or some combination of the two, individuals are able to generate income that provides them with the independence to make decisions free from external interference. A free individual has the liberty to choose the extent to which he or she wishes to work versus enjoy his or her leisure time. For example, a professional may choose to donate time to charity, an autoworker may choose to purchase a boat, or a teacher may choose to take a foreign vacation.

However, each time that the government increases taxes, the ability of workers to provide for their families is reduced, either by forcing them to work longer hours to maintain their standard of living, or by forcing them to accept a lower standard of living if they work the same number of hours.

Tax freedom day calculations (which estimate the number of days in a year an individual must “work” for the government before beginning to work for him or herself) indicate the extent to which both our countries' governments have impeded the freedom of their citizens to make such choices for themselves. Americans must work until May 2 before they begin to work for themselves. If one employs the identical tax burden calculation, Canadians are even worse off—we must work for the government until June 9!¹

Data from the Fraser Institute's Economic Freedom of the World publication support the argument that the freedom of the individual to earn income has been impaired by government taxation and spending. The 1997 edition rated the United States a 5.8 out of a possible 10 in so-called “Takings,” i.e., levels of government taxation and spending. Canada performed even more miserably, with a Takings score of 4.0.

What do these two statistics tell us? Most importantly, the increasing tax burden imposed on workers over the past generation has diminished employees' ability to provide for themselves and their families. Unfortunately, recent history is equally disturbing. In 1996, for example, the Canadian government passed the largest tax increase in its history. Concurrently, even a Republican-dominated Congress has been reluctant to implement large-scale, Reaganesque tax reform.

On this Labour Day, let's all gladly take a day off to celebrate the wonders of our labour. But, let's also rejoice in our enduring (albeit qualified) freedoms, reminding ourselves of the importance of retrieving the virtues of free markets, equitable taxation, and limited government.

Note

¹This is the Washington-based Tax Foundation's calculation of the comparative international tax burden, based on 1992 OECD data. It differs significantly from The Fraser Institute's calculation of Tax Freedom Day in Canada, which by our method falls on June 27.

Patrick Basham is The Fraser Institute's Director of the Social Affairs Centre. He is completing his Ph.D. in Political Science from Cambridge University.

Jason Clemens is a policy analyst at The Fraser Institute. He has a Masters Degree in Business Administration from the University of Windsor.

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