Structural Unemployment | Definition | Example
Structural Unemployment Definition: Structural unemployment is a longer-lasting form of unemployment caused by fundamental shifts in an economy and exacerbated by extraneous factors such as technology, competition, and government policy.
Structural unemployment occurs because workers’ lack the requisite job skills or workers live too far from regions where jobs are available and cannot move closer. Jobs are available, but there is a serious mismatch between what companies need and what workers can offer.
What Is Structural Unemployment
Structural unemployment is caused by forces other than the business cycle. This means that structural unemployment can last for decades and may need radical change to redress the situation. If unemployment is not addressed, it can increase the unemployment rate long after a recession is over and can increase the natural rate of unemployment.
For example, hundreds of thousands of well-paying manufacturing jobs have been lost in the United States over the past three decades as production jobs have migrated to lower-cost areas in China and elsewhere. This decline in the number of jobs creates a higher natural rate of unemployment. Growing technology in all areas of life increases future unemployment since workers without adequate skills will get marginalized. Even those with skills may face redundancy, given the high rate of technological obsolescence.
Which Of The Following Statements Illustrates Structural Unemployment?
Technological advances have created unemployment in the newspaper industry. Web-based advertising has drawn advertisers away from newspaper ads. Online news media has drawn customers away from physical newspapers. Newspaper employees, such as journalists, printers, and delivery route workers, were laid off. Their skills were focused on the paper’s method of distributing news. They had to get new training before qualifying for a job in the same field.
Farmers in emerging market economies are another example of structural unemployment. Free trade allowed global food corporations access to their markets. That put small-scale farmers out of business. They couldn’t compete with the lower prices of the global firms. As a result, they headed to cities in search of work. This unemployment existed until they were retrained, perhaps in factory work.
How the Financial Crisis Made Structural Unemployment Worse
The financial crisis of 2008 created record levels of unemployment. Over 8 million jobs were lost. By October, 2009, the unemployment rate had risen to 10 percent. Housing, which usually drives the expansion phase of the business cycle, was suppressed by a wave of foreclosures. As a result, almost half the unemployed were out of a job for six months or more. As their skills and experience became outdated, cyclical unemployment led to unemployment.
It hit the older jobless person the most. Although younger workers were more likely to be unemployed, they weren’t that way for long. They either found a low-paying job or went back to school, dropping out of the labor force altogether. Their unemployment duration was bad enough, at 19.9 weeks, but less than the older unemployed.
Those aged 55 to 64 were out of work for 44.6 weeks, or almost a year. Those over age 65 looked for work 43.9 weeks before finding a job. Many just gave up. That forced them into early retirement.
Why were older workers more affected than younger ones by unemployment? There were five reasons:
- Older workers were more likely to have jobs in industries like newspapers that were replaced by new technology.
- They were less likely to go back to school.
- They were less able to move to find a new job because they owned their home. The depressed housing market meant they’d be more likely to lose money or default on an upside-down mortgage if they did try to sell.
- Many were not willing to take a lower-paying job.
- Older workers faced unacknowledged age discrimination.
Structural Unemployment Examples
While the 2007-2009 global recession caused cyclical unemployment, it also increased unemployment in the United States. As the jobless rate peaked over 10%, the average unemployment period for millions of workers rose significantly. These workers’ skills deteriorated during this time of prolonged unemployment, causing unemployment. The depressed housing market also affected the job prospects of the unemployed, and therefore, increased structural unemployment. Relocating to a new job in another city would mean selling homes at a substantial loss, which not many were willing to do, creating a mismatch of skills and job availability.
France has also been hit hard by structural unemployment. The country faced a recession due to natural disasters and a strike movement that halted economic recovery. unemployment arises from the fact that a large portion of France’s workforce is participating in temporary second-level jobs with little chance of being promoted to long-term contracts, forcing them to strike. This results in a lack of job flexibility and little job mobility, sidelining many French workers who have not adapted to new tasks and skills. Labor unions and the French government are negotiating to help curb unemployment.
- Structural unemployment is long-lasting unemployment that comes about due to shifts in an economy.
- This type of unemployment happens because jobs are available but there’s a mismatch between what companies need and what available workers offer.
- Unemployment can last for decades and usually requires a radical change to reverse.
- Technology tends to exacerbate unemployment, marginalizing certain workers and rendering particular jobs, such as manufacturing, obsolete.