Hrm. Why didn't this happen in OTL?
Well, you did, to an extent. Its been a while since I did much reading on the Populists, but a lot of it seems to come down to the Free Silver campaign. Silver was great for farmers, as the inflation effectively made their debts worth less money. However, as a wage earner, silver would have been terrible, as the inflation would have made your wages worth less.
If you could stop free Silver from becoming the dominant issue of the People's Party, which it wasn't during the first few years, you'd stand a better chance of being able to bring labor onboard.
Another problem is that, especially in the larger urban centers, most labor was foreign born. Many of the labor unionists were Slavic, Italian, Jewish and so forth. This caused some problems for the farmers of the great plains which were largely of WASP decent.
Even in the rural areas which had a great deal of ethnic communities, many of the non-anglo farmers were not particularly political, and wanted to just keep to themselves. You see this in North Dakota where the Populist party failed, and the later wave of Progressivism was focused mainly on the anglo population from the towns. It wasn't until the 1910s that you saw much of the German-Russian population become politically active and, once they did, the state becomes dominated by the Non-Partisan League (a forerunner to Minnesota's Farm-Labor Party of the 1920s and 1930s, actually)
So, in order to get a successful Populist movement, you need to make the People's Party really try to reach out to the ethnic communities of the cities, in order to draw in labor. In a TL where the South won't be voting in US elections, this might be a bit easier, as the People's Party really hoped to unite the small southern farmers in order to make the party competetive on the national scale. Without that base of support, an alliance with labor might be a bit more viable.
Also, if the Republican Party is weak, then the entire Upper Midwest, which in OTL was a Republican bulwark, is up for grabs. Considering the reformist tendencies of that region, I think it fairly likely they would wall into that camp in the ATL, at least by 1890 or so.