Structural Unemployment Definition: 3 Unemployment Examples

Economists define structural unemployment as a type of unemployment that reveals a severe mismatch between the new jobs companies offer and what the labor market can comfortably perform. This long-term unemployment can last for years, adversely affecting the business cycle, stymying economic growth, and even causing great recessions.

Structural unemployment sees skilled workers looking for jobs but living too far from the regions where available jobs exist, or an area might have several job vacancies but lack qualified workers. Technological advances and structural changes often speed up this form of high unemployment, which can often affect manufacturing jobs and other lower-paying ones.

There are a few causes of structural unemployment, which itself generally affects those who work minimum-wage jobs. Consider the following causes:

1. 1. Automation of jobs: Technological advancement can mean companies will let go of lower-level employees without putting retraining programs in place to foster the workers’ skills necessary for other jobs.
2. 2. Changes in consumer demands: Shifts in consumer demand and market equilibrium might put workers out of work. The formation of new industries to match consumer demand might require workers to learn new skills.
3. 3. Rising education expenses: General education and certain degrees can hold the key for people who want to access a wider pool of jobs as well as higher-paying jobs. Still, pricey tuition makes it difficult for some people to attend schools, especially those outside their home areas, which translates to fewer in-demand skills in a changing economy.

New technology, the relocation of jobs, and the obsolescence of older positions all factor into structural unemployment. Consider how the following examples impact employment:

• Job relocation: As the United States exports more production jobs to China and other countries to save money, people working those manufacturing jobs domestically will lose work. These workers must gain the necessary skills to be hirable elsewhere in their region.
• New technology: As grocery stores install more self-serving checkout counters, it puts more cashiers out of work. Simultaneously, those workers might need more skills to find jobs in evolving, new industries.
• Obsolete work: The rise of artificial intelligence in the workplace, specifically in factories, has changed the handling of work. For example, many companies now use machines to optimize the inspection process of products in their factories.

Structural unemployment necessitates great efforts to reverse unemployment trends. The consequences of people being out of work because they lack specific skills can increase the natural unemployment rate over time. Employees, in particular older workers, need access to education and training programs to learn new skill sets. These learning opportunities are necessary to find full employment as the US economy becomes more automated and international in scope.

There are four main types of unemployment in an economy—frictional, structural, cyclical, and seasonal—and each has a different cause.

1. 1. Cyclical unemployment: A declining demand causes this type of unemployment. Businesses cannot offer jobs when there is not enough demand in an economy for goods and services. According to Keynesian economics, cyclical unemployment is a natural result of the business cycle in times of recession: if all consumers become fearful at once, consumers will attempt to increase their savings at the same time, which means there will be a decrease in spending, and businesses will not be able to employ all employable workers.
2. 2. Frictional unemployment: Temporary transitions in workers’ lives, such as when a worker moves to a new city and has to find a new job, causes frictional unemployment. Graduated college students entering the workforce also contribute to frictional unemployment. It is the most common cause of unemployment, and it is always in effect in an economy.
3. 3. Seasonal unemployment: Different industries or parts of the labor market being available during different seasons causes seasonal unemployment. For instance, unemployment increases in the winter months because many agricultural jobs end after the harvesting of crops in the fall, and those workers must find new jobs.
4. 4. Structural unemployment: This happens when there is a mismatch in the demographics of workers and the types of jobs available, either when there are jobs available that workers don’t have the skills for or when there are workers available but no jobs to fill. Structural unemployment is most evident in industries undergoing technological advancements. For example, much of the work in the farming industry is becoming mechanized, meaning fewer farmers are necessary, and many lose work. When these farmers go to cities to find work, they may see no other similar jobs to apply their skills.

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