Structural Unemployment

Structural unemployment is a form of unemployment resulting from a mismatch between demand in the labour market and the skills and locations of the workers seeking employment. Even though the number of vacancies may be equal to, or greater than, the number of the unemployed, the unemployed workers may lack the skills needed for the jobs, or they may not live in the part of the country or world where the jobs are available.

Structural unemployment is a result of the dynamics of the labor market, such as agricultural workers being displaced by mechanized agriculture, unskilled laborers displaced by both mechanization and automation, or industries with declining employment. Many of these displaced workers are "left behind" due to costs of training and moving (e.g., the cost of selling one's house in a depressed local economy), inefficiencies in the labor markets, such as discrimination or monopoly power, or because they are unsuited for work in growing sectors such as health care or high technology.

Structural unemployment is hard to separate empirically from frictional unemployment, except to say that it lasts longer. As with frictional unemployment, simple demand-side stimulus will not work to easily abolish this type of unemployment.

Structural unemployment may also be encouraged to rise by persistent cyclical unemployment: if an economy suffers from long-lasting low aggregate demand, it means that many of the unemployed become disheartened, while their skills (including job-searching skills) become "rusty" and obsolete. Problems with debt may lead to homelessness and a fall into the vicious circle of poverty. This means that they may not fit the job vacancies that are created when the economy recovers. The implication is that sustained high demand may lower structural unemployment. This theory of persistence in structural unemployment has been referred to as an example of path dependence or "hysteresis."

Seasonal unemployment may be seen as a kind of structural unemployment, since it is a type of unemployment that is linked to certain kinds of jobs (construction work, migratory farm work). The most-cited official unemployment measures erase this kind of unemployment from the statistics using "seasonal adjustment" techniques.

Structural unemployment is one of the five major categories of unemployment distinguished by economists. Structural unemployment is generally considered to be one of the "permanent" types of unemployment, where improvement if possible, will only occur in the long run.

Read more about Structural Unemployment:  Possible Causes

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