In this paper, we put forward a theoretical framework for understanding a positive relationship between labor laws and innovation and rigorously test it against both historical and empirical data. We show how several periods in the economic history of the United States – like the increase in slave-field hand productivity in cotton picking in the Antebellum South, the transition in the North from artisanal shops to nonmechanized factories, the increase in productivity in mechanized textile factories in the Northeast in the late Antebellum period, and the increase in productivity in sharecropping after the Civil War – can be understood, at least partially, through our theoretical framework. To build further support for the framework, we empirically analyze how change in labor laws during the early twentieth century affect patent issuance by state. And we also look at how changes in worker power, as proxied by strike activity, affected patent issuance by industry between the early twentieth century and 1980.