Act I

The Sleep-Tite Pajama factory is a major industry in the sleepy midwest town of Cedar Rapids, Iowa. Hines is the time-study man there and he loves his work (The Pajama Game). However, all is not well at the plant (Racing with the Clock), as the new superintendent Sid (A New Town is a Blue Town) is quick to discover. The workers are unhappy over the failure of factory boss, Hasler, to pay them an industry-wide raise: 7 1/2 cents per hour. Sparks fly as Sid encounters Babe, the Union's Grievance Committee, although at first she stoutly maintains "I'm Not At All In Love," much to the amusement of Poopsie, Mae, and the other girls. As preparations for the annual company picnic proceed, Hines also has problems with his girl Gladys, and is glad to take instruction from wise secretary Mabel, promising her that I'll Never Be Jealous Again. Sid, rebuffed by Babe because he is Management and she is Union, ponders his dilemma alone (Hey There).

At the company picnic, Union head Prez is on the prowl (Her Is), but this is the Once A Year Day when anything goes, and it seems that Babe and Sid have found each other at last. The romance blooms, while Sid bewails the futility of Small Talk. In spite of the currents of labor unrest swirling around them, they seem lost in their love (There Once Was A Man). The idyll cannot last, however; the workers are steadfast in their damands for a raise and institute a work slowdown. Babe escalates the sanctions and is fired by Sid!

Act II

Act two finds a union meeting in progress, entertainment compliments of Dolores and a few of the cutting room boys (Steam Heat). While the Union representatives plan their strategy, Sid comes to Babe's home to try and make up, but with no success. The slowdown at the plant has Hines in a tizzy (Time Study Man), and the salesman Max is in town with evidence of even more trouble. Sid realizes that in order to bring the episode to a close, he must be able to examine the company books, jealously guarded by Gladys. He decides to try and seduce her into giving him the key to the ledgers, and heedless of Hines' suspicions, she suggests the location: Hernando's Hideaway. The plot succeeds and Sid confronts factory boss Hasler, while the workers rally to demand their Seven and a Half Cents. With Sid's intervention, the strike is successfully setteled, the raison is won, and Babe and Sid are reconciled as the curtain falls.