The Reagan Revolution blew through government at a moment when the Federal Reserve’s campaign against skyrocketing inflation had begun dampening wages for workers, and finance was on its way to becoming king in the American economy. These changes meant fewer good paying jobs for African Americans and drove salaries up in professions dominated by whites.
But the policies championed by Ronald Reagan exacerbated these trends. Reagan entered the presidency determined to slash taxes, deregulate markets, liberate capital, and decrease domestic spending. The crown jewel of his agenda was a sweeping, across-the-board income tax cut passed in 1981. Reagan and his allies embraced supply-side economics, predicting that cutting taxes on the wealthy would enable them to create jobs, thereby sharing prosperity with less prosperous Americans. These conservatives saw deficit-financed tax cuts as investments in the future, while dismissing spending on things like K-12 education and food programs as a waste of taxpayer money despite the fact that many of these programs paid for themselves.
But their economic theories proved disastrously false. Cutting taxes on top earners and capital gains, and financing it with deficits, ended up disproportionately benefiting white earners and owners of stocks. Those who earned wages and had high proportions of their family wealth tied up in homes, especially Black Americans, felt little of the wealth trickling down.
Reagan’s industrial policy also fueled the racial wealth gap because it pushed offshoring jobs and layoffs of U.S. workers. Across manufacturing industries, executive pay soared while companies sought cheaper labor overseas and U.S. plants closed. Meanwhile, the economy shifted to emphasize service work, which paid less and was far less likely to come with union protections.
That was especially true because in 1981, despite being a former union president himself, Reagan fired 11,345 striking members of the Professional Air Traffic Controllers Organization and refused to re-hire them. Busting a major union sent a message to employers that they could fire employees at will. That contributed to a decline in unionized workers across the board, which disproportionately affected African Americans who were over-represented in unions.
Even as offshoring and the decline of unions left Black Americans in the workforce vulnerable, Reagan gutted the apparatus designed to protect them. He appointed Clarence Thomas — a staunch opponent of affirmative action — as the director of the Equal Employment Opportunity Commission (EEOC). Under Thomas, the EEOC prosecuted narrow individual discrimination lawsuits rather than class action race discrimination claims, circumscribing its reach.