Structural Unemployment

Structural unemployment results from mismatches between the skills required for available jobs and the skills held by the unemployed. Even when there is plenty of job availability, this mismatch means the unemployed cannot access jobs that fit their skill sets.

Structural employment is often rooted in major economic shifts. Deindustrialization is a common cause: as an industry leaves a given region, many workers in that region are left jobless with skills that do not apply to the jobs that are now available to them. It can arise even in periods when economic growth is progressing, and the economy is thriving.

In response to structural employment, efforts to boost aggregate growth will not rectify the problem. Rather, effective methods to minimize this problem include geographical subsidies and retraining.

Causes of Structural Unemployment

This problem has multiple interconnected causes. The first is technological development, which often makes jobs obsolete, thereby increasing rates of unemployment. It also means that companies have to hire fewer employees across the board; they achieve higher levels of productivity at lower costs when they fire human workers in favor of applying new technologies. These unemployed workers then lack alternative job options that fit their skill sets.

Second, and relatedly, globalization has made it so that firms can outsource their labor needs to countries where costs are lower. This is especially true in the field of manufacturing.

Geographical immobilities also contribute to structural unemployment. It makes intuitive sense that, when workers cannot migrate to job opportunities suited to their skill sets, structural unemployment is worsened. There may be many reasons that workers are unable or unwilling to move: housing costs (as discussed in the examples section below), family ties, lack of savings (the process of moving, itself, does cost money), and many other personal factors.

Examples of Structural Unemployment

A significant recent example is the Great Recession that began in 2007, which increased levels of structural unemployment in the U.S. Workers were unemployed for long periods, which caused their skills to decline due to lack of use, such that they became less suited to the relatively few available jobs. The state of the housing market also affected unemployment: homes were selling for very low prices, so those who owned homes were understandably hesitant to sell their homes and move to other cities to seek out jobs elsewhere. This created geographical immobility that further perpetuated the problem of structural unemployment.

Another example is the major global shifts in agriculture markets as industrial agriculture has gone global. The globalization of agriculture has made it very difficult for many small commercial farmers to stay afloat. They are unable to match the economies of scale achieved by larger farms, so they cannot compete with those prices. Many are forced to abandon their farms and migrate to urban areas in search of work, but often lack the skills needed for these urban jobs (such as working in factories). This creates a situation of structural unemployment, which is only resolved as these migrating workers learn new job skills.

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