Structural Unemployment Definition Causes How It Works

Structural Unemployment Definition

Meaning Explained

Structural unemployment is a mismatch between the workers’ skills in the economy and the skills that the employers demand from the workers. The main reason for this type of unemploymentUnemploymentUnemployment refers to a situation where individuals capable of working seek active opportunities for work but cannot find any for various reasons.read more is the technological changes in the market that make the skills of many job laborers obsolete. For example, many lucrative manufacturing jobs in the United States have been lost over the last 30 years. The jobs related to production have migrated to the areas requiring low costs in China and others.

Examples

Let us consider the following examples of structural unemployment to understand better.

Example #1 – Industry Shifts

Mr. Gorge was a manufacturing expert. He has managed the shop floor since he was 19 years old. Later, manufacturing jobs started shifting from the U.S. to China due to the new economyNew EconomyNew Economy refers to industries that use innovative and cutting-edge technologies that boost industrial production and economic growth.read more. As a result, the current employer asked Mr. Gorge to leave the organization with a severance package. After leaving the job, Mr. Gorge could not find any job matching his skills. Somehow, he could find a position as sales manager, which offered him very little pay and a lower post than his earlier post.

Example #2 – Seasonal Unemployment

A worker named Mr. Eden does manual labor work in the mango field for years, giving him employment for only four months a year. So, he manages his earnings by working in a commercial complex as a security guard.

Example #3 – Technology obsolescence

Mr. Dhal has experience in writing algorithms in a specific computer language. However, all know that technology quickly changes because the language has become obsolete. As a result, since the language is outdated, Mr. Dhal’s experience is useless in the market. Due to such technological changes, the employer of Mr. Dhal has asked him to leave the organization. After that, he had to indulge in the job relating to soft skills training as he found his expertise nowhere.

Top Causes of Structural Unemployment

The main reason for structural unemployment is the mismatch of workers’ skills with the jobs available. The causes of structural unemployment disparity of skills are as follows:

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#1 – Geographic

There are places where the worker’s job skills match the jobs available, but these places can be far from the worker’s geographical region, and the workers are not ready to relocate to such areas.

#2 – Macro-Economic Changes

Older workers face these issues. They have worked in a certain skill with perfection. But suddenly, the jobs related to that particular skill are found nowhere, and their skills have become obsolete. Let us take the example of Dubai, which is known as an oil-rich company. However, in today’s scenario, it becomes an economyEconomyAn economy comprises individuals, commercial entities, and the government involved in the production, distribution, exchange, and consumption of products and services in a society.read more that depends more on tourism and logistics. Therefore, all the workers who had expertise in oil drilling were jobless, and there was a shortage of workforce professionals and staff in the hotel.

Wage-related is one of the causes of structural unemployment where workers often do not accept the job because the package they offer is very little. However, such low packages are an abundance of labor that is easily available at a low price.

Cure for Structural Unemployment

The treatment for structural unemployment can be: –

1 – Efficient Training of the Workforce

States should recognize the changes needed in the economy and create training programs to guide the workforce and update them with technological and other changes. As the cost of the training program cannot be affordable for some workers, the government should try to provide such training programs free of charge and facilitate the placement of jobs after the completion of training programs.

With the development of information technology, it is easier to break geographical barriers, and the workers can easily work from distant locations with the set of skills they possess.

Disadvantages of Structural Unemployment

#1 – Inefficiency

The main problem with structural unemployment is the inefficiency factor. When there is no work for the huge percentage of workers, the high amount of workforce used for production goes unused. Only efficient economies can use the labor forceLabor ForceThe labor force (LF) refers to the number of persons working (employed) and not working but actively seeking work (unemployed). It excludes the homemakers, retired personnel, and discouraged workers from the count.read more to its maximum.

#2 – Support Costs

Another disadvantage of structural unemployment is the country’s cost while supporting the unemployed workers at a given point. Although some countries do not pay to help the unemployed, some countries provide benefits in cash or kind to the unemployed workforce.

#3 – Instability

Structural unemployment also increases instability in the country. Although structural unemployment at a lower level in modern economies is necessary, there can be unrest when it elevates its peak. That is because all the job seekers want to get employed to earn money, but if they fail to get a job, they may cause violence or push the government to change.

#4 – Crime

Unemployment and crime are correlated. In need of money, people start indulging in robbery to meet their living expenses. Crime increases the instability in the area. It results in spending money on security rather than producing goods and services.

Conclusion

Structural unemployment arises due to the mismatch between workers’ skills and the jobs available in the market. Due to structural unemployment, some workers find it difficult to get employment in the economy. Nowadays, production and manufacturing have shifted to machine-oriented jobs, which kills the need for human resources in the organization. But the duration of this unemployment is generally medium-term.

Structural unemployment generally takes one to two years to get resolved or is sometimes slightly higher. Therefore, one should conduct training programs to get the workers updated with the jobs available to fix the problem of structural unemployment timely.