Structural unemployment: causes and examples

It is a mismatch in the skills of the unemployed and the available jobs. It is caused by a shift in the economy that makes it hard for some people to get a job. This type of unemployment is more difficult to fix than other types. 

The structural unemployment can continue to keep the unemployment rate at high levels long after a depression has ended. It can lead to a higher rate of natural unemployment if ignored by policymakers.

Looking at the U.S. rate of unemployment over the years can help you understand the state of the economy in the United States and how structural unemployment occurs. The chart below shows the structural unemployment in the United States over the years.

What causes structural unemployment?

3 This is often the case in manufacturing. Robots are replacing unskilled employees. They are often required to get computer training if they wish to continue working in their industry.

Trade Agreements such as NAFTA, which lifted the first trade restrictions in Mexico, are another cause. The former workers were left without work. This agreement was one of the main causes of unemployment in the country. 5

Industry Impacted by Structural Unemployment

The newspaper industry has been structurally impacted by technological advances. Web-based ads have taken advertisers away from newspapers. Online news media have drawn away customers from newspapers.

The free trade gave global food corporations the opportunity to access their markets. Small-scale farmers were forced out of business. The lower prices offered by global firms made it impossible for them to compete. 8 They were structurally unemployed until they received retraining, possibly in factory work.

How the Financial Crisis Worsened Structural unemployment

The financial crises of 2008 led to record unemployment. 9 In October 2009, unemployment had reached 10.2%. 1 The housing market, which is usually the driver of expansion in the business cycle was suppressed due to a wave foreclosures. A wave of foreclosures caused a drop in housing, which is usually the driver of expansion phases.

Although young workers are more likely to find themselves unemployed, this doesn’t last long. They found low-paying jobs or returned to school and dropped out of the workforce. They had a bad unemployment period of 19.9 weeks but it was less than older unemployed. 12

The 55-64 age group was out of work for almost a year. Over 65s searched for a job for 43.9 weeks. Many gave up. They were forced to retire early.

Why are older workers more affected by structural unemployment than younger workers? Five reasons were given:

1. Newspapers, for example, are more likely to be replaced by new technologies than industries such as older workers.
2. It was less likely that they would return to school.
3. Because they owned a home, it was harder for them to relocate to find a job. They were more likely to lose their money or default on a mortgage due to the depressed housing market if they tried to sell.
4. Many people were unwilling to accept a job with a lower salary.
5. Older workers face unacknowledged discrimination based on their age. 12

How structural unemployment affects you

The structural unemployment in the United States increases income inequality. This is because older workers who have been unemployed for a long time lack the technical skills. While unemployed, industries evolve. Unemployment and job creation are not matched.

Many older unemployed people rely more heavily on Social Security and Medicare benefits than if they had a job. Some may start receiving social security at the age of 62 rather than wait until 65 to receive their payouts. This could put a heavy burden on the federal government’s budget, and increase its debt levels.

FAQs (Frequently Asked Questions)

What are the types of unemployment?

There are many different types of unemployment. The three main types include cyclical unemployment, structural unemployment and frictional employment.

What type of unemployment has resulted from COVID-19?