Automatic word wrapping can be enabled by setting (label) property "Configuration" to "Cropping". (Yes, I know - "cropping" is not wrapping. Still, yEd's cropping configuration does both - cropping and wrapping.) Additionally, you also need to set property "Size" to a value other than "Fit Content".
There are some limitiations, though: The cropping and wrapping algorithmus always works with the rectangular bounds of the corresponding node. The cropping configuration does not support HTML formatted text or label icons.