What Is Structural Unemployment?
Let me explain structural unemployment directly: it's a longer-lasting type of unemployment driven by fundamental shifts in the economy, made worse by factors like technology, competition, and government policies. You see this when workers don't have the right skills for available jobs or they're too far from where those jobs are and can't relocate easily. Jobs exist, but there's a clear mismatch between what employers need and what workers can provide.
How It Works
Structural unemployment operates outside the normal business cycle, meaning it can drag on for decades and often demands major changes to fix. If you ignore it, it keeps the overall unemployment rate high even after recessions end, pushing up the natural unemployment rate. Think about how hundreds of thousands of manufacturing jobs vanished in the US over the past three decades as production moved to cheaper locations like China. This left workers structurally unemployed if they couldn't switch fields. With technology advancing everywhere, expect more of this, as even skilled workers face obsolescence from AI and rapid tech changes.
Causes
Several factors trigger structural unemployment, and you should recognize them. Technological changes top the list, as industries adopt new processes that make old jobs obsolete and force companies to cut costs with automation. Poor training or lack of education adds to it—workers who don't adapt to new practices stay unemployed. Competition and globalization play a role too, with companies offshoring to lower-wage areas, bypassing skilled but expensive domestic workers.
How to Overcome Structural Unemployment
- Continually develop your professional skillset to avoid obsolescence in an evolving economy.
- Build a strong professional network to get referrals for new positions, especially if your skills need a boost.
- Research market trends to anticipate industry changes and shift to more secure roles proactively.
- Consider relocating to areas where your skills match job demands for better security.
Structural Unemployment vs. Other Types
Compare structural unemployment to cyclical: both are involuntary, but cyclical ties to economic cycles like recessions and is shorter-term, while structural is deeper and harder to fix. Against frictional unemployment, which is voluntary—like leaving for better balance or education—structural forces people out without choice and affects whole industries. Seasonal unemployment, driven by temporary demand like holidays, is short and expected, unlike the prolonged, economy-wide impact of structural shifts.
Disadvantages
Structural unemployment has clear downsides you can't ignore. During the 2007-2009 recession, it worsened as skills eroded in prolonged joblessness, making reemployment tougher. Housing market slumps trapped workers, unwilling to sell at a loss to relocate, creating skill-job mismatches. Overcoming it often means personal costs, like paying for your own training or juggling learning with full-time work.
Impact of COVID-19
The COVID-19 pandemic hit structural unemployment hard, with rates spiking to 14.8% in April 2020, though many losses were temporary. Deeper changes led to voluntary exits, and as of late 2022, the 3.5% rate might understate reality due to non-seekers, pointing to lasting structural shifts.
Real-World Example
Look at France over the past decade: structural unemployment stemmed from temporary jobs with little mobility, leading to strikes and sidelined workers. President Macron's reforms aimed to loosen labor laws, dropping unemployment from 9.5% in 2017 to 8.2% by 2019, and to 7.3% by Q3 2022, with long-term rates at their lowest since 2009.
Structural Unemployment FAQs
What's the best example? The shift from landlines to cell phones left behind workers who didn't adapt to mobile tech. What causes it? Major operational changes as the world adapts to new preferences, risking job obsolescence. Is cyclical better? Yes, it's shorter and follows market cycles, unlike structural's deep roots. Why is it bad? It demands big adaptations like retraining or moving, harder than resolving cyclical or seasonal issues.
The Bottom Line
In essence, structural unemployment hits when economic changes eliminate demand for certain services, leaving workers jobless because their roles are obsolete. It's more severe than cyclical, frictional, or seasonal types, often requiring deliberate steps to overcome.
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