Union strength has declined across the industrialized world, profoundly shaping socio- economic inequality and welfare states. However, there has been significant cross-national variation. Most explanations for variation focus on differences in state labor regimes. But such explanations leave unanswered why differences exist, and how they might change over time. Using an historical comparison of two similar welfare states, the U.S. and Canada, I explain why different labor regimes emerge, how these differences affect regime development over time, and how they affect union strength. Union strength diverged in the U.S. and Canada due to different processes of working class political incorporation. These created different labor regimes in the U.S. and Canada, governed by different organizing logics. In the U.S., labor was incorporated as an interest group into a labor regime governed by a pluralist idea. In Canada, labor was incorporated as a class representative into a labor regime governed by a class idea. This led to a Canadian labor regime that legitimized class issues and facilitated addressing them, and a U.S. labor regime that delegitimized class issues and prevented addressing them. As employer aggression flared in both countries in the 1970s, the Canadian regime proved better able to hold employers in check and protected workers’ collective bargaining rights. As a result, union density stabilized in Canada, while plummeting in the U.S.