Reagan inaugurated an era of hostility between the federal government and organized labor. In August 1981, when 13,000 members of PATCO, the union of air traffic controllers, began a strike in violation of federal law, Reagan fired them all. He used the military to oversee the nation’s air traffic system until new controllers could be trained.
Reagan’s action inspired many private employers to launch anti-union offensives.
The hiring of workers to replace permanently those who had gone on strike, a rare occurrence before 1980, became widespread.
Manufacturing employment, where union membership was concentrated, meanwhile continued its long-term decline. By the mid-1990s, the steel industry employed only 170,000 persons—down from 600,000 in 1973.
When Reagan left office, both the service and retail sectors employed more Americans than manufacturing, and only 11 percent of workers with non-government jobs were union members.
“Reaganomics,” as critics dubbed the administration’s policies, initially produced the most severe recession since the 1930s. A long period of economic expansion, however, followed the downturn of 1981-1982. As companies “downsized” their workforces, shifted production overseas, and took advantage of new technologies such as satellite communications, they became more profitable. At the same time, the rate of inflation, 13.5 percent at the beginning of 1981, declined to 3.5 percent in 1988, partly because a period of expanded oil production that drove down prices succeeded the shortages of the 1970s. The stock market rose substantially. In October 1987, the market suffered its sharpest drop since 1929, but stocks soon resumed their upward climb.