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Structural Unemployment


Structural unemployment refers to joblessness caused by changes in the economic or market structure. It occurs when the skills of the available workforce and the jobs being created by the economy do not match. This type of unemployment often lasts longer than other types because workers may need time to acquire new skills or move to locations where jobs are available.


The phonetic pronunciation of “Structural Unemployment” is:Strʌktʃərəl ʌnimˈploɪmənt

Key Takeaways

<ol><li><b>Involuntary Unemployment:</b> Structural unemployment refers to a type of involuntary unemployment caused by a mismatch between the skills that workers in the economy can offer and the skills demanded by employers. People affected by structural unemployment do not have the relevant skills needed for the jobs, or they live too far from areas where jobs are available and cannot move closer.</li><li><b>Result of Structural Changes:</b> This type of unemployment can occur when there are structural changes in the economy, which might be caused by technological advancements, changes in consumer preferences, or globalization, among others. These changes can transform certain industries or sectors of the economy, resulting in displacement of workers who lack the skills needed for newly emerging jobs.</li><li><b>Long-Term Unemployment:</b> Structural unemployment is a form of long-term unemployment, because it can take a considerable amount of time for workers to acquire the new skills needed for the evolving job market or move to places where jobs are available. This type of unemployment can lead to significant social and economic problems, including loss of human capital, increased burden on public finances, and higher poverty rates.</li></ol>


Structural unemployment is a crucial term in business and finance as it refers to a form of unemployment that occurs as a result of a mismatch between the skills that workers in the economy can offer, and the skills that are genuinely needed by the employers. This could be caused by technological advancements, changes in preferences, or geographical differences between firms and workers. It’s significant because it directly affects the economy’s efficiency and labor mobility. Furthermore, high levels of structural unemployment may indicate deeper problems in an economy’s education or training systems, or serious barriers in the labor market. The concept aids in crafting policies to improve overall labor market efficiency and increase economic productivity.


Understanding the term ‘Structural Unemployment’ is crucial for analyzing the health of an economy and formulating appropriate economic policies. Structural unemployment refers to a form of unemployment resulting from a mismatch between demand and supply in the labor market. This mismatch could be due to various changes that an economy undergoes – technological advancements, changes in preferences of the consumers, shifts in the economy from one sector to another, or an inability of the labor force to relocate to regions with job openings.The concept of Structural Unemployment is used by economists and policymakers to identify weaknesses in the structure of an economy. For instance, if an economy heavily dependent on an outdated industry experiences high unemployment, it may indicate a structural issue that needs addressing – like a need to enhance the skill sets of the workforce or stimulate growth in other sectors. It’s also useful in discerning the nature of unemployment within an economy, allowing for differentiating between cyclical (short-term) unemployment caused by economic recessions and structural (long-term) unemployment caused by fundamental shifts in an economy. Ultimately, acknowledging and addressing structural unemployment can guide proper allocation of resources and policy interventions to boost economic health and stability.


1. Technological Advancement: One of the most common examples of structural unemployment is seen in industries that are heavily influenced by technology. For instance, the introduction of automation and artificial intelligence in manufacturing has resulted in many workers losing their jobs as machines and software can perform tasks more efficiently. Areas once driven by manual labor, such as auto production or coal mining, have seen significant decreases in job availability due to these advancements.2. Shift in Economic Structure: The financial crisis of 2008 serves as an example of structural unemployment. Many financial analysts, brokers, and other finance-related workers lost their jobs as the banking and housing markets crashed. Since the economy shifted away from excessively risky financial mechanisms toward more stable and sustainable practices, these workers needed to learn new skills or seek employment in different industries.3. Changing Consumer Habits: At a more micro-level, local industries can suffer structural unemployment due to changing consumer habits. For example, the growth of e-commerce has caused many traditional retail stores to close, leading to job losses. As more people shop online from the convenience of their homes, the demand for brick-and-mortar shop employees has significantly decreased. Many of these workers are required to retrain or relocate to find suitable employment.

Frequently Asked Questions(FAQ)

What is structural unemployment?

Structural unemployment is a type of unemployment that occurs when there is a mismatch between the skills that workers in the economy can offer and the skills demanded by employers. It can also happen when there’s a geographical mismatch between where jobs are available and where workers live.

What causes structural unemployment?

This type of unemployment is often caused by technological changes that make some job skills obsolete, shifts in the economy that a create demand for new types of jobs, or geographic changes that move jobs to locations where there aren’t enough trained workers.

How can structural unemployment be solved?

Solutions may involve developing and implementing retraining programs for workers whose skills have become obsolete, encouraging geographic mobility, and investing in education and job training to ensure workers have the skills needed by employers.

Is structural unemployment voluntary or involuntary?

Structural unemployment is generally considered involuntary, as it results from factors beyond a worker’s control such as changes in the economy or technological advancements.

How does structural unemployment differ from cyclical unemployment?

Structural unemployment is related to the structure of the economy and tends to be long-term, while cyclical unemployment is related to the economic cycle of growth and recession. Cyclical unemployment increases during a recession and decreases during an expansion, while structural unemployment can occur even when the economy is strong.

What impact does structural unemployment have on the economy?

High levels of structural unemployment can indicate a less efficient economy, as there are idle workers who could be contributing to economic output if their skills matched with job opportunities. It also increases government costs due to unemployment benefits and can result in a higher natural rate of unemployment.

What is an example of structural unemployment?

An example could be a highly-skilled factory worker who loses their job because their factory has decided to automate production with robots. Despite the worker’s experience, their specific skills are no longer needed by their former employer and they become structurally unemployed.

Related Finance Terms

  • Economic Cycle
  • Technological Unemployment
  • Labour Market Flexibility
  • Skills Gap
  • Job Displacement

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