Structural Unemployment_ Causes, Example, And Policies

Structural Unemployment: Causes, Example, And Policies

Employment 5 Mins Read August 9, 2023 Posted by Soumava Goswami

Structural unemployment results due to various macroeconomic shifts and the disparity created between the existing skills of the job force and the skills that companies require. Structural unemployment lasts long and can have drastic effects on the economy as well as society. To learn more about this type of unemployment, read on through to the end of the article.

What Is Structural Unemployment?

What Is Structural Unemployment

Structural unemployment happens due to various fundamental macroeconomic shifts occurring in the economy, along with various factors like government policies, competition, technology, etc.

According to Investopedia,

?Structural unemployment occurs because workers lack the requisite job skills or 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.?

In this type of unemployment, it is seen that though there is the availability of jobs, there is a big mismatch between the needs of companies and the skills offered by the existing workforce. This leads to many employees losing their jobs due to a lack of skills.

What Are The Major Structural Unemployment Causes?

What Are The Major Structural Unemployment Causes

The following are some of the major causes of structural unemployment:

  1. Although a worker?s skill matches the job, the job location is far from the region.
  2. Due to macroeconomic changes, and changes in technology, the skills of certain workers become obsolete, and they do not get jobs anywhere else with their existing skills.
  3. In many cases, workers do not accept jobs because they feel that the wage which is offered to them is too low.
  4. Technological automation, in recent years, has been one of the big reasons for structural unemployment.

What Are The Impacts Of Structural Unemployment?

What Are The Impacts Of Structural Unemployment_

One of the major problems of structural unemployment is that it can last for decades and can heavily impact the economy. There is a radical change needed to reverse the situation. Structural unemployment marginalizes certain workers in the economy and negatively impacts the manufacturing sector in general.

According to Masterclass.com,

?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.?

The best cure for structural unemployment is to train the workforce efficiently and bring new policies that break the geographical barriers. Otherwise, structural unemployment can lead to higher inefficiency, greater support costs, instability in society, and higher crimes due to rising unemployment.

Some Structural Unemployment Examples

Some Structural Unemployment Examples

As already discussed, structural unemployment comes in a variety of forms and can be caused due a variety of factors. Here are some of the major examples of structural unemployment that will help you to understand its effect on the economy:

1st Example Of Structural Unemployment

Mr. Rodriguez has been working in a manufacturing company and managing the shop floor for many years, leading to him becoming an expert in manufacturing. However, with the rise of the new economy, many manufacturing companies started shifting their bases from the USA to China since manufacturing costs were less there.

Hence, the company asked Rodriguez to leave and gave him a severance package. However, Mr. Rodriguez struggled to find a company that gave him a job as per his skills and experience. As a result, he ended up with the post of sales manager and had to work in a lower having lesser pay. This is structural unemployment due to industry shifts.

2nd Example Of Structural Unemployment

Mr. Allen is a manual laborer and works in the mango field as an employee for only four months a year. So, for the rest of the year (for eight months), he works as a security guard at a commercial complex to manage his earnings. This seasonal unemployment is also a form of structural unemployment.

3rd Example Of Structural Unemployment

Ms. Barnes works as a cashier in a major grocery store outlet. However, with the introduction of self-serving checkout counters, she lost her job. Furthermore, she also needs to upskill herself with new and evolving technology to work in new industries, stay relevant, and get a job. This is an example of structural unemployment being created due to the introduction of new technology.

4th Example Of Structural Unemployment

Mr. Garcia worked in an assembly line of a major car manufacturing facility. However, the rise of artificial intelligence and its introduction into assembly lines throughout the United States led to people like Mr. Garcia losing their jobs. Artificial Intelligence is faster, and work handling is easier for companies now. Companies also do not need to worry about the safety of employees on the assembly line.

Furthermore, many such manufacturing companies are using machines to optimize the inspection process of manufactured items. This makes even inspection workers lose their jobs. The above examples portray structural unemployment due to obsolete work.

5th Example Of Structural Unemployment

Mr. Patel has top-end knowledge of a specific computer language, its syntax, as well as its algorithms. However, with the introduction of new and more effective computer languages, the earlier one, in which Mr. Patel is experienced, has now become obsolete.

Hence, with the obsolescence of the computer language, Mr. Patel is no longer useful, and he eventually lost his job. To keep up with the relevant technology, he needs to upskill himself with new programming languages always and focus on learning new soft skills as well. The above example is an example of how technology obsolescence can create structural unemployment.

Wrapping Up

Hope this article was helpful for you in getting a better idea of what structural unemployment is and what its causes are. You can see here that with various changes in the market, employees lose their jobs, which creates a big gap in the economy when it comes to unemployment.

To limit structural unemployment, it is essential to train the workforce and keep them relevant to technology and other market forces. Do you think long-term structural employment makes a society more prone to crime? Share your thoughts on the matter in the comments section below.

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A passionate writer and an avid reader, Soumava is academically inclined and loves writing on topics requiring deep research. Having 3+ years of experience, Soumava also loves writing blogs in other domains, including digital marketing, business, technology, travel, and sports.

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