Nancy Folbre, UMass Amherst economics professor, writes in the Economix blog about how large numbers of unemployed workers in the U.S. may be left behind because the close relationships between economic recovery, job creation and increased profits are being frayed by globalization. Folbre cites a paper co-authored by Deepankar Basu, assistant professor of economics at UMass Amherst. Basu and his co-author found that there is a weakening correlation between output growth and employment growth in the United States. This means that even as the economy grows, employment has not risen as much as the models predicted. Folbre’s blog also notes that the unemployed, in addition to not being needed by business, become increasingly viewed as a drag on society because they spend less and depend on unemployment benefits. (New York Times, 5/2/11)
Macroeconomic models of these relationships based on historical data are increasingly obsolete. As Deepankar Basu and Duncan Foley argued in a recent Political Economy Research Institute paper, the correlation between output growth and employment growth in the United States has declined in recent years.
Foreign-owned businesses may locate in the United States, helping compensate for declining investment by American multinationals. But as all businesses become more footloose, they have less incentive to support public spending on education, health, human services or social safety nets, including unemployment insurance.
Unneeded as workers, the unemployed also become superfluous as consumers and burdensome as citizens.
Super sad no-love story. Wish it weren’t true.