The Keystone Research Center released its annual “State of Working Pennsylvania” report ahead of Labor Day 2025. In addition to highlighting a weakening economy from a workers’ perspective, it calls out a need for policy reversals and labor organizing to restore an economy that benefits working families.

“The data in this year’s report underscores the critical need for policy stability and worker-centered approaches as Pennsylvania navigates economic headwinds,” explains Keystone Research Center Executive Director Bernie Gallagher. “While uncertainty dominates the national landscape, what remains certain is that strong unions and robust worker protections create resilient economies.”

Key findings

Economic uncertainty has replaced the strong economy of recent years, with labor market indicators worsening even as the impacts of massive federal policy shifts are only beginning to be felt.

Unemployment has increased, hiring has slowed, and wages have flatlined as workers have lost some of the leverage they enjoyed in last year’s tighter job market.

The reversal of climate investments has stalled a historic tripling of private spending on manufacturing construction from 2021 to 2024.

While union coverage declined in Pennsylvania in 2024, recent organizing victories may inspire a “contagion effect” and a wave of unionization, especially among younger workers in nonmobile service industries.

Federal policies that shifted toward working families from 2021 to 2024 have been reversed, threatening to deepen economic pain for Pennsylvania workers.

Regarding the country’s gross domestic product (GDP) and jobs, according to the report the U.S. GDP shrank in the first quarter of 2025 and PA output growth flatlined. In the first seven months of 2025, U.S. jobs only grew half as much as they did the previous year, and layoffs of federal employees (2,600 in PA) this year contributed to slower job growth. They noted that the annual inflation went up to 2.7 percent from April’s 2.3 percent.

The researchers identify federal policy as the “prime suspect” causing the reduction in workers’ leverage. Included are tariffs and the initial cuts in clean economy subsidies, as well as federal worker layoffs and stripping federal workers of union rights.

The report notes that Pennsylvania’s failure to increase the minimum wage since 2009 “has cost low-wage workers in Pennsylvania as a group over $10 billion since 2013.”

“While we’ve seen important gains for workers in recent years, current federal policies threaten to undermine that progress,” observes KRC Senior Research Analyst Claire Kovach, coauthor of the report. “The current climate of uncertainty is discouraging business investment and complicating planning for both employers and workers.”

Recommendations

Enact a state minimum wage increase.

Restore federal tax credits for clean energy and manufacturing investment.

Use the bully pulpit at the state and federal levels to support union organizing and develop model legislation to strengthen workers’ rights for future legislative sessions.

“Given the lack of support for working families in Washington D.C., Pennsylvania lawmakers need to lean in strongly to support workers,” says KRC Research Associate and report coauthor Maisum Murtaza. “Just as federal policies were responsible for the economy’s weakening, federal policies need to shift again to avoid a deeper downturn.”

The Harrisburg-based institute recommends these steps to protect workers’ rights and promote economic stability.

Keystone Research Center, 412 N. Third St, Harrisburg: 717-255-7181, keystoneresearch.org