Macro Roundup

but market power!

"...Even as awave of mergers has cut the number of major carriers to fourand significantly reduced competition, lower-cost airlines continue to play a role in moderating ticket costs....Thecost of a round-trip domestic ticket averaged more than $490 in the first half of the year, up slightly compared with 2016, according to Airlines Reporting Corporation, a company that settles flight transactions between a number of carriers and booking services like Expedia.... The jostling, however, has left airline investors skittish. As the publicly traded airlines in July reported earnings for the second quarter, shareholders sold off their shares, worried about the fight over fares and capacity increases...."

Micah Maidenberg, "How Low-Cost Airlines Alter the Economics of Flying,"New York Times, September 1, 2017, https://mobile.nytimes.com/2017/09/01/business/budget-airlines-ticket-prices.html

How Low-Cost Airlines Alter the Economics of Flying

When Spirit Airlines began offering flights between Detroit and Philadelphia, the average price for a one-way ticket dropped by as much as 50 percent.

For more than three years, the average one-way fare between Detroit and Philadelphia never dipped below $308, and sometimes moved higher, topping $385 at one point.

But then, early in 2016, fares suddenly started to fall, according to data from the Bureau of Transportation Statistics. By the end of the year, the average one-way ticket between the two cities stood at just $183.

What changed? The primary factor was Spirit Airlines.

The low-cost carrier began operating flights from Philadelphia International Airport to Detroit in April 2016, offering one-way fares for less than $100, in some cases. Spirit’s move into the route pushed down average ticket costs at all carriers on it, including Delta Air Lines and American Airlines.

“Without the low-cost carriers, we would have been looking at a pretty significant downturn in activity,” said James Tyrrell, chief revenue officer at Philadelphia International Airport.

Frontier Airlines, another low-cost carrier, had also added flights from Philadelphia, Mr. Tyrrell said. Without such airlines, he added, “you would have absolutely seen a different pricing structure.”

Even as a wave of mergers has cut the number of major carriers to four and significantly reduced competition, lower-cost airlines continue to play a role in moderating ticket costs.

While such airlines offer a no-frills passenger experience and charge plenty of fees for such luxuries as additional bags or extra legroom, they are able to stimulate new demand from occasional fliers with relatively cheap prices and even take passengers from the major carriers.

Interactive Feature | Why We Feel So Squeezed When We Fly Here is what happens when people fly more often, in fuller planes and pay higher fees.

This dynamic is not new: In 1993, researchers at the Department of Transportation called the same trend the “Southwest effect,” named for Southwest Airlines, which grew rapidly thanks to basic, low-cost flights. A recent study by a University of Virginia professor and a consultant at the Campbell-Hill Aviation Group calculated that average one-way fares are $45 lower when Southwest serves a market with nonstop flights. Researchers have shown other low-cost carriers also push down fares.

“It’s impossible to underestimate just how important the effect of low-cost carriers are on a given route,” said William McGee, the aviation adviser for Consumers Union.

Carriers like United and American do not compete with carriers like Frontier and Spirit on every type of passenger. Lucrative corporate accounts are owned by the big carriers, and business travelers avoid the cheaper airlines, often choosing to pay premium prices at the last moment to get seats on the flights that best fit their schedules.

But the low-cost carriers nonetheless force the big airlines to figure out a way to draw the most price-sensitive fliers in any given market — those who scour the internet for the cheapest tickets possible. Those customers make up a significant portion of travelers, meaning the major carrier cannot just ignore them.

“Those passengers certainly are important,” said David Weingart, an economist at the aviation consultant GRA. “The larger airlines have proven that in how they’ve reacted, in how they’ve tried to capture or recapture those passengers.”

Delta, American and United Airlines have all rolled out “basic economy” fares. Such tickets are priced competitively against Spirit and Frontier, but do not offer the amenities that most consumers have come to expect on a flight, like receiving a seat assignment ahead of a flight or obtaining a refund for a ticket.

Of all the major carriers, United is fighting on price the most aggressively.

Scott Kirby, who was appointed as United’s president a year ago, has shifted the carrier’s strategy toward the low-cost airlines, mirroring one he helped to drive when he served as a top executive at American.

Pushing back against Wall Street’s wishes to limit capacity growth, United is adding seats in a number of its major markets across the country. It has, for example, swapped out smaller jets for larger planes to increase the number of seats it has available to sell, and matched fares offered by low-cost carriers.

By expanding capacity, United aims to get back to what Mr. Kirby calls its “natural” share of passengers in some of its hubs. The carrier now expects to increase its seat capacity in the domestic market by as much as 4.5 percent this year over last year, double the 2 percent growth Delta has forecast. American does not expect its capacity to change.

United Airlines and other large carriers have rolled out “basic economy” fares, in part to better compete with Spirit and Frontier on price.

“We’re just returning to where United’s natural market share is,” Mr. Kirby told stock analysts in April. “We’re going to be very careful to calibrate how it’s working and how we’re doing.”

United’s new approach has put it into direct competition with Spirit in Newark, Houston and Chicago, according to analysts and executives. Spirit has certainly noticed.

“While we are not surprised that the environment remains very competitive, it is surprising to see our competitors resort to the unusual level of discounting we are currently seeing, especially since we are still in the summer peak period,” Matthew Klein, chief commercial officer at Spirit, said during a call with analysts in July.

Denver has also emerged as a battleground. Frontier, a privately held carrier, announced in July that it planned to add 21 flights from Denver International Airport, mostly to smaller cities like Albuquerque; Louisville, Ky.; and Charleston, S.C. The company said that it planned to double the number of nonstop routes it operates to 314 and its total number of routes to 1,000 by next summer.

Because of the underlying strength of the economy in the Denver area, United, Southwest and Spirit have added flights there in recent years as well. Kim Day, the chief executive at the Denver airport, said fares at the hub are now 15 percent below the national average.

She said that she believed each of the airlines that use the sprawling facility 25 miles from the city’s downtown is drawing different kinds of passengers.

“They’ve all found their niches,” she said. “If they can make money here, they’re going to continue to flow connecting passengers in here.”

The current skirmishes do not amount to a broad-based fare war. Many routes in the United States are dominated by a single carrier, insulating them from price competition.

The cost of a round-trip domestic ticket averaged more than $490 in the first half of the year, up slightly compared with 2016, according to Airlines Reporting Corporation, a company that settles flight transactions between a number of carriers and booking services like Expedia.

The jostling, however, has left airline investors skittish. As the publicly traded airlines in July reported earnings for the second quarter, shareholders sold off their shares, worried about the fight over fares and capacity increases.

But anxiety among investors is good news for fliers. Travelers on routes that are competitive will probably be able to snap up good deals.

“I don’t see the prices really rising that much from year to year, based on that ability to have that competition and keep prices at a normal level,” said Merritt Pullam, a real estate agent who lives with his wife and two young children in Denver and flies to places like California and Hawaii for vacations.

“…Unfortunately, deficit financing would make a temporary tax cut even more harmful. The tax cut would leave a larger government debt in its wake, which would drive up interest rates, impeding investment long after the tax cut expired. Any tax increases that might eventually be adopted to service the extra debt would inflict further economic damage. A deficit-financed temporary tax cut is no substitute for what the country needs: a permanent corporate tax rate cut with the revenue loss offset by other tax increases or spending cuts. When it comes to cutting the corporate tax rate, Republicans should go permanent or go home….”

Alan Viard, "On cutting the corporate tax rate, GOP must go permanent or go home," American Enterprise Institute, August 25, 2017, https://www.aei.org/articles/on-cutting-the-corporate-tax-rate-gop-must-go-permanent-or-go-home/

On cutting the corporate tax rate, GOP must go permanent or go home

Republicans are eager to cut the 35 percent corporate tax rate. Permanently cutting the tax rate — one of the highest in the world — would be a good way to grow the economy. Unfortunately, some Republicans are talking about making the rate cut temporary.

A temporary rate cut would be worse than no rate cut at all. Not only would a temporary cut do nothing to lower long-run tax burdens, it would actually raise taxes on some investments made while it is in effect. Rather than encouraging new investment, a temporary cut would primarily give companies windfall gains on investments they’ve already made.

Under corporate income tax rules, companies are taxed on the payoffs from their investments, but are allowed to deduct the costs of making the investments. Cutting the tax rate affects both sides of the equation. The taxes on the payoffs go down, but so do the tax savings from the cost deductions.

A permanent rate cut lowers the net tax burden on investment. Because the typical investment’s payoffs are bigger than its costs, the lower tax bills on the payoffs outweigh the smaller tax savings from deducting the costs. The lower tax burden is likely to draw investment to the United States, making American workers more productive and boosting their wages.

A temporary rate cut has very different effects. It can actually raise the net tax burden on new investments, depending on when the payoffs are earned and when the costs are deducted. With a temporary rate cut, timing is everything, as taxes go down only on the payoffs that are earned during the time the rate cut is in effect and tax savings shrink only for the costs that are deducted during that time.

Suppose, for example, that an investment’s payoffs are spread over 20 years, but that the tax rules provide that its full costs are immediately deducted when it is made. If the investment is made shortly after a 10-year rate cut starts, the rate cut reduces taxes only on the payoffs earned during the first half of its life, but shrinks all of the tax savings from the immediate cost deduction. Things are even worse if the investment is made shortly before the rate cut expires. The rate cut then applies to almost none of the payoffs, but still shrinks all of the tax savings from the cost deduction.

The temporary rate cut is somewhat less harmful if the tax rules provide that an investment’s costs are depreciated over a number of years. But the problem doesn’t go away. Because the depreciation deductions are generally claimed earlier than the payoffs are earned, a temporary rate cut still applies to a bigger share of the deductions than of the payoffs, particularly if the investment is made shortly before the rate cut expires. The tax burden on new investments may still rise or may fall only slightly.

Even if the temporary rate cut offers little help for new investments, it reduces government revenue because it lowers taxes on the ongoing payoffs companies receive from investments made before the rate cut took effect. The temporary rate cut primarily gives companies an unexpected gain on their past investments rather than an incentive to make new investments. This helps corporate shareholders, but not the economy.

The need to address the tax cut’s revenue loss has spurred the recent interest in making it temporary. Senate rules protect a temporary tax cut from a filibuster even if it adds to the deficit, but protect a permanent tax cut only if it its revenue loss is offset by other tax increases or entitlement cuts. Some Republicans want to make the tax cut temporary, so that they can more easily use deficit financing.

Unfortunately, deficit financing would make a temporary tax cut even more harmful. The tax cut would leave a larger government debt in its wake, which would drive up interest rates, impeding investment long after the tax cut expired. Any tax increases that might eventually be adopted to service the extra debt would inflict further economic damage.

A deficit-financed temporary tax cut is no substitute for what the country needs: a permanent corporate tax rate cut with the revenue loss offset by other tax increases or spending cuts. When it comes to cutting the corporate tax rate, Republicans should go permanent or go home.

Neil Irwin, "To Understand Rising Inequality, Consider the Janitors at Two Top Companies, Then and Now,"New York Times, September 3, 2017, https://www.nytimes.com/2017/09/03/upshot/to-understand-rising-inequality-consider-the-janitors-at-two-top-companies-then-and-now.html

To Understand Rising Inequality, Consider the Janitors at Two Top Companies, Then and Now

ROCHESTER — Gail Evans and Marta Ramos have one thing in common: They have each cleaned offices for one of the most innovative, profitable and all-around successful companies in the United States.

For Ms. Evans, that meant being a janitor in Building 326 at Eastman Kodak’s campus in Rochester in the early 1980s. For Ms. Ramos, that means cleaning at Apple’s headquarters in Cupertino, Calif., in the present day.

In the 35 years between their jobs as janitors, corporations across America have flocked to a new management theory: Focus on core competence and outsource the rest. The approach has made companies more nimble and more productive, and delivered huge profits for shareholders. It has also fueled inequality and helps explain why many working-class Americans are struggling even in an ostensibly healthy economy.

The $16.60 per hour Ms. Ramos earns as a janitor at Apple works out to about the same in inflation-adjusted terms as what Ms. Evans earned 35 years ago. But that’s where the similarities end.

Ms. Evans was a full-time employee of Kodak. She received more than four weeks of paid vacation per year, reimbursement of some tuition costs to go to college part time, and a bonus payment every March. When the facility she cleaned was shut down, the company found another job for her: cutting film.

Ms. Ramos is an employee of a contractor that Apple uses to keep its facilities clean. She hasn’t taken a vacation in years, because she can’t afford the lost wages. Going back to school is similarly out of reach. There are certainly no bonuses, nor even a remote possibility of being transferred to some other role at Apple.

Yet the biggest difference between their two experiences is in the opportunities they created. A manager learned that Ms. Evans was taking computer classes while she was working as a janitor and asked her to teach some other employees how to use spreadsheet software to track inventory. When she eventually finished her college degree in 1987, she was promoted to a professional-track job in information technology.

Less than a decade later, Ms. Evans was chief technology officer of the whole company, and she has had a long career since as a senior executive at other top companies. Ms. Ramos sees the only advancement possibility as becoming a team leader keeping tabs on a few other janitors, which pays an extra 50 cents an hour.

They both spent a lot of time cleaning floors. The difference is, for Ms. Ramos, that work is also a ceiling.

Eastman Kodak was one of the technological giants of the 20th century, a dominant seller of film, cameras and other products. It made its founders unfathomably wealthy and created thousands of high-income jobs for executives, engineers and other white-collar professionals. The same is true of Apple today.

But Kodak also created enough working-class jobs to help create two generations of middle-class wealth in Rochester. The Harvard economist Larry Summers has often pointed at this difference, arguing that it helps explain rising inequality and declining social mobility.

“Think about the contrast between George Eastman, who pioneered fundamental innovations in photography, and Steve Jobs,” Mr. Summers wrote in 2014. “While Eastman’s innovations and their dissemination through the Eastman Kodak Co. provided a foundation for a prosperous middle class in Rochester for generations, no comparable impact has been created by Jobs’s innovations” at Apple.

Ms. Evans’s pathway was unusual: Few low-level workers, even in the heyday of postwar American industry, ever made it to the executive ranks of big companies. But when Kodak and similar companies were in their prime, tens of thousands of machine operators, warehouse workers, clerical assistants and the like could count on steady work and good benefits that are much rarer today.

When Apple was seeking permission to build its new headquarters, its consultants projected the company would have 23,400 employees, with an average salary comfortably in the six figures. Thirty years ago, Kodak employed about 60,000 people in Rochester, with average pay and benefits companywide worth $79,000 in today’s dollars.

Part of the wild success of the Silicon Valley giants of today — and what makes their stocks so appealing to investors — has come from their ability to attain huge revenue and profits with relatively few workers.

Apple, Alphabet (parent of Google) and Facebook generated $333 billion of revenue combined last year with 205,000 employees worldwide. In 1993, three of the most successful, technologically oriented companies based in the Northeast — Kodak, IBM and AT&T — needed more than three times as many employees, 675,000, to generate 27 percent less in inflation-adjusted revenue.

The 10 most valuable tech companies have 1.5 million employees, according to calculations by Michael Mandel of the Progressive Policy Institute, compared with 2.2 million employed by the 10 biggest industrial companies in 1979. Mr. Mandel, however, notes that today’s tech industry is adding jobs much faster than the industrial companies, which took many decades to reach that scale.

Many of the professional jobs from those companies in the 1980s and ’90s have close parallels today. The high-paying positions setting corporate strategy, developing experimental technologies and shaping marketing campaigns would look similar in either era.

But a generation ago, big companies also more often directly employed people who installed products, moved goods around warehouses, worked as security guards and performed many of the other jobs needed to get products into the hands of consumers.

In part, fewer of these kinds of workers are needed in an era when software plays such a big role. The lines of code that make an iPhone’s camera work can be created once, then instantly transmitted across the globe, whereas each roll of film had to be manufactured and physically shipped. And companies face brutal global competition; if they don’t keep their work force lean, they risk losing to a competitor that does.

But major companies have also chosen to bifurcate their work force, contracting out much of the labor that goes into their products to other companies, which compete by lowering costs. It’s not just janitors and security guards. In Silicon Valley, the people who test operating systems for bugs, review social media posts that may violate guidelines, and screen thousands of job applications are unlikely to receive a paycheck directly from the company they are ultimately working for.

And the phenomenon stretches far beyond Silicon Valley, where companies like Apple are just a particularly extreme example of achieving huge business success with a relatively small employee count. The Federal Express delivery person who brings you a package may well be an independent contractor; many of the people who help banks like Citigroup and JPMorgan service mortgage loans and collect delinquent payments work for contractors; and if you call your employer’s computer help desk, there’s a good chance it will be picked up by someone in another state, or country.

Apple emphasizes that its products generate many jobs beyond those who receive a paycheck from the company directly. The company estimates 1.5 million people work in the “app economy,” building and maintaining the mobile applications used on Apple products. Apple stores in 44 states tend to offer more generous pay and benefits than is standard in the retail industry. And it is growing quickly, including far from its California headquarters, such as with 6,000 jobs in Austin, Tex., at an average salary of $77,000 a year, and many more indirectly through what it says is $50 billion in annual spending to suppliers in the United States.

“We’re responsible for creating over two million jobs in the U.S., across all 50 states,” said an Apple spokesman, “ranging from construction, customer care, retail and engineering to app development, manufacturing, operations and trucking. All Apple employees, whether full time or part time, are eligible for benefits and stock grants. We’re also fortunate to have skilled contractors that contribute to our products and services daily, along with over 9,000 suppliers in every state.”

Perhaps the biggest indictment of the more paternalistic approach taken by an earlier generation of corporate behemoths is that, Kodak, despite having been an early innovator in digital photography, is a shell of its former self. After a bankruptcy and many years of layoffs, the company now has only 2,700 employees in the United States and 6,100 worldwide.

But it is also clear that, across a range of job functions, industries and countries, the shift to a contracting economy has put downward pressure on compensation. Pay for janitors fell by 4 to 7 percent, and for security guards by 8 to 24 percent, in American companies that outsourced, Arindrajit Dube of the University of Massachusetts-Amherst and Ethan Kaplan of Stockholm University found in a 2010 paper.

These pay cuts appear to be fueling overall inequality. J. Adam Cobb of the Wharton School at the University of Pennsylvania and Ken-Hou Lin at the University of Texas found that the drop in big companies’ practice of paying relatively high wages to their low- and mid-level workers could have accounted for 20 percent of the wage inequality increase from 1989 to 2014.

The same forces that explain the difference between 1980s Kodak and today’s Apple have big implications not just for every blue-collar employee who punches a timecard, but also for white-collar professionals who swipe a badge.

Phil Harnden was coming out of the Navy in 1970 when he applied for a job at Kodak, and soon was operating a forklift in a warehouse. He made $3 an hour, equivalent to $20 an hour today adjusted for inflation. That is roughly what an entry-level contracting job testing software pays.

The difference between the two gigs, aside from the absence of heavy machinery in Apple’s sleek offices, is the sense of permanence. Mr. Harnden put in 16 years operating forklifts before he left in 1986 to move to Florida. When he returned 10 years later, he was quickly rehired and even kept his seniority benefits.

In interviews, tech industry contractors in Silicon Valley describe a culture of transience. They can end up commuting to a different office park that houses a new company every few months; in many cases 18 months is the maximum a contractor is allowed to spend at one company.

“I would rather have stability,” said Christopher Kohl, 29, who has worked as a contractor at several Silicon Valley companies, including a stint doing quality assurance on Apple Maps. “It’s stressful to find a new job every 12 to 18 months.”

For Silicon Valley’s contracting class, there are reminders large and small of their second-class status. Contractors generally do not receive the stock options that have made some midlevel Silicon Valley workers wealthy over the years, nor the generous paid time off for vacation, illness or the birth of a child. The health insurance plans tend to be stingier than those that the tech giants they serve provide for their direct employees.

The smaller reminders can be just as telling. One former Apple contractor recalled spending months testing a new version of Apple’s operating system. To celebrate the release, the Apple employees they’d worked closely with on the project were invited to a splashy party in San Francisco, while the contractors had beers among themselves in a neighborhood pub.

The compensation these white-collar contractors receive puts them squarely in the middle rungs of workers in the United States, and the most skilled can make six figures (though that doesn’t go far in the hyper-expensive Bay Area housing market). Apple, based on its consultants’ report, expected to be indirectly responsible for nearly 18,000 jobs in Santa Clara County by now at an average pay of about $56,000 a year.

There are some advantages. If they work for one of the companies like Apple or Google that feature a subsidized, high-quality cafeteria, contractors can enjoy the food. They can tell their friends that they work at one of the world’s most admired companies, and enjoy predictable, regular hours. Once in a while, a contractor will be hired into a staff position.

“It’s not evil,” said Pradeep Chauhan, managing partner of OnContracting, a site to help people find tech contracting positions. “They have a job and they’re getting paid. But it’s not ideal. The problem with contracting is, you could walk in one day and they could say, ‘You don’t need to come in tomorrow.’ There is no obligation from the companies.”

And that is the ultimate contrast with the middle-skill, middle-wage jobs of earlier generations of titans — a sense of permanence, of sharing in the long-term success of the company.

“There were times I wasn’t happy with the place,” Mr. Harnden said of his Kodak years. “But it was a great company to work for and gave me a good living for a long time.”

When an automaker needs a supplier of transmissions for its cars, it doesn’t just hold an auction and buy from the lowest bidder. It enters a long-term relationship with the supplier it believes will provide the best quality and price over time. The company’s very future is at stake — nobody wants to buy a car that can’t reliably shift into first gear.

But when that same automaker needs some staplers for the office supply cabinet, it is more likely to seek out the lowest price it can get, pretty much indifferent to the identity of the seller.

Labor exists on a similar continuum.

The right product engineer or marketing executive can mean the difference between success or failure, and companies tend to hire such people as full-time employees and as part of a long-term relationship — something like the transmission supplier. What has changed in the last generation is that companies today view more and more of the labor it takes to produce their goods and services as akin to staplers: something to be procured at the time and place needed for the lowest price possible.

There is plenty of logic behind the idea that companies should focus on their core competence and outsource the rest. By this logic, Apple executives should focus on building great phones and computers, not hiring and overseeing janitors. And companies should outsource work when the need for staff is lumpy, such as for software companies that may need dozens of quality-assurance testers ahead of a major release but not once the product is out.

There’s no inherent reason that work done through a contractor should involve lower compensation than the same work done under direct employment. Sometimes it goes in the other direction; when a company hires a law firm, it is basically contracting out legal work, yet lawyers at a firm tend to be paid better than in-house counsel.

But as more companies have outsourced more functions over more time, a strong body of evidence is emerging that it’s not just about efficiency. It seems to be a way for big companies to reduce compensation costs.

Firms in the United States are legally required to offer the same health insurance options and 401(k) match to all employees — meaning if those programs are made extra generous to attract top engineers, a company that doesn’t outsource will have to pay them for everyone.

More broadly, there are a whole set of social pressures and worries about morale that encourage companies to be more generous with pay and benefits for employees who are on the same payroll.

“There was an overriding concern about equity,” said Mr. Cobb, the Wharton professor. “Firms would try to set pay so that the gap between the security guard or administrative assistant and senior V.P. wasn’t as great as you might expect, essentially by paying lower- and middle-skill workers more than they were probably worth on the market.”

Linda DiStefano applied for a secretarial job at Kodak during Easter week of her senior year in high school in 1968, and was hired to start immediately after her graduation for $87.50 a week, today’s equivalent of $32,000 a year. She put in four decades at the company, first as a secretary, then helped administer corporate travel and other projects.

“I helped put on the dinners for the board of directors, which in retrospect someone of my grade shouldn’t have been doing,” she said. “But I had a series of managers who trusted me.”

It bought her a house off Lake Avenue, a new car every few years and occasional long-distance trips to Motown reunion concerts. When her department was abolished in 2008, the travel bookings contracted out, she was making $20 an hour. The best job she could find was as a pharmacy technician at a grocery store for $8.50 an hour.

As you drive around Rochester, the role of Eastman Kodak in the city is evident everywhere, in the Kodak Tower that looms over the center of town, in the Eastman Theater on Main Street, and in the hulking buildings and empty parking lots of the manufacturing center known as Kodak Park.

In reading the company’s old annual reports, you get a sense that its executives thought of the jobs created and the wages paid as a source of pride and achievement. On the first page of most years’ annual reports was an accounting of how many employees the company had in the United States and worldwide, and the total pay and benefits they received.

Apple, with a spaceship-like campus about to open, looms large over Cupertino in its own way, accounting for something like 40 percent of the jobs in the city, and investing $70 million in local environmental and infrastructure upgrades. It is no middle-class enclave; the median home price is $1.9 million.

“We definitely feel a sense of pride to be the home of Apple,” said Savita Vaidhyanathan, the mayor of Cupertino. “But they consider themselves a global company, not necessarily a Cupertino company.” She said she has never met Tim Cook, Apple’s chief executive. “We would have a hard time getting an audience with anybody beyond upper-middle management,” she said.

Ms. Ramos, the Apple janitor, lives down the road in San Jose. She pays $2,300 monthly for a two-bedroom apartment where she and her four children live. Before overtime and taxes, her $16.60 an hour works out to $34,520 a year. Her rent alone is $27,600 a year, leaving less than $600 a month once the rent is paid. Overtime, in addition to the wages from one of her teenage children who works part time at a grocery store, helps make the math work, though always tenuously.

She works from 6 p.m. until 2 a.m. On days when one of the other cleaners doesn’t show up, she may get a few extra hours, which is great for the overtime pay, but it means even less sleep before it is time to take her children to school.

A 60-cent-an-hour raise this year negotiated by her union, the SEIU United Service Workers West, helped. Kodak in its prime was not unionized, though in that era when organized labor was more powerful over all, managers deliberately kept wages high to try to prevent the company’s workers from forming one.

There is little chance for building connections at Apple. “Everyone is doing their own thing and has their own assignment, and we don’t see each other outside of work,” said Ms. Ramos in Spanish.

Ms. Evans, who was a Kodak janitor in the early 1980s before her rise to executive there and at other leading firms like Microsoft and Hewlett-Packard, recalls a different experience.

“One thing about Eastman Kodak is they believed in their people,” said Ms. Evans, now chief information officer at Mercer, the human resources consulting giant. “It was like a family. You always had someone willing to help open a door if you demonstrated that you were willing to commit to growing your skills and become an asset that was valuable for the company.”

The shift is profound. “I look at the big tech companies, and they practice a 21st-century form of welfare capitalism, with foosball tables and free sushi and all that,” Rick Wartzman, senior adviser at the Drucker Institute and author of “The End of Loyalty,” said. “But it’s for a relatively few folks. It’s great if you’re a software engineer. If you’re educated, you’re in command.”

But in the 21st-century economy, many millions of workers find themselves excluded from that select group. Rather than being treated as assets that companies seek to invest in, they have become costs to be minimized.

Correction: Sept. 10, 2017

An Upshot article last Sunday about how an increase in outsourcing at large companies has fueled economic inequality misstated a measure of Apple’s job creation compared with Kodak’s decades ago. Apple has created tens of thousands of working-class jobs; it has not fallen short of matching Kodak in that regard. The article also misstated the amount of a wage increase that Marta Ramos, a janitor at Apple, received this year. Her raise was 60 cents an hour, to $16.60 hourly. It was not a dollar-an-hour raise.

Karl Russell and Nelson Schwartz, "What’s Driving Job Growth in Industrial America?,"New York Times, September 1, 2017, https://www.nytimes.com/interactive/2017/09/01/business/economy/manufacturing-trump-jobs.html

What’s Driving Job Growth in Industrial America?

President Trump campaigned on reviving the kinds of jobs associated with the industrial age — work done in factories, coal mines and oil fields.

Mr. Trump has called for expanding drilling on federal lands, while loosening regulations to help manufacturers. And since he took office, hiring has indeed ticked upward in these sectors — but is there any connection?

After a tough 2016 that saw the loss of more than 100,000 jobs, employment in manufacturing and mining (which includes oil and gas drilling) is rebounding. Still, there is plenty of catching up to do — both sectors are well below peak employment levels in recent years.