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Structural Unemployment Causes & Example

Edith Forsyth, Shawn Grimsley
  • Author
    Edith Forsyth

    Edith Forsyth has taught High School Business for over five years. They have a bachelor’s degree in business administration from University of Evansville, Evansville, Indiana.

  • Instructor
    Shawn Grimsley

    Shawn has a masters of public administration, JD, and a BA in political science.

Learn the definition of structural unemployment and understand its causes and the policies in place to address it. Discover various structural unemployment examples. Updated: 05/15/2022

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What is Structural Unemployment?

Structural unemployment refers to unemployment caused by structural economic changes. It emerges when there is a gap between the skills possessed by the population and the jobs available. This structural unemployment definition confirms that changes in fundamental factors such as technology and government policy contribute to this problem.

Notably, structural unemployment differs from other types of unemployment, such as cyclical unemployment, because it is long-lasting. In fact, any type of unemployment that persists for many years results in structural unemployment. When the fundamental structure of an economy changes, it becomes difficult for people to find full-time employment. For example, if technology improves, many people lacking the skills necessary to remain competitive in the labor market will be unable to find employment for many years.

Recessions and other extraneous factors like competition can exacerbate structural unemployment. Because this form of unemployment is caused by forces other than business cycles, radical changes may be needed to address the situation. Without these radical solutions, structural unemployment may persist long after recessions end.

Over the last three decades, the United States has experienced structural unemployment. Structural changes in the US economy occurred when production firms shifted operations to low-cost regions such as China. As a result, thousands of jobs were lost. The decline in employment opportunities lasted many years, resulting in full-blown structural unemployment.

Also, as technology continues to advance, there is an increased risk of future structural unemployment. For example, artificial intelligence and robot technology are expected to replace many workers, such as security guards, soldiers, drivers, and surgeons. The growing use of technology will make many skilled and unskilled workers obsolete.


Robots are replacing people in jobs, resulting in structural unemployment

Picture taken during the launch of a technologically advanced robot


The long-lasting implications of structural unemployment make it a significant problem. It is important to note that this type of unemployment is not an indicator of economic recessions because it can emerge even during economic growth.

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What Causes Structural Unemployment?

As already clarified, structural employment is caused by fundamental changes in the economy's structure. But what are the specific causes of structural employment? Below are the reasons why this type of unemployment occurs:

  • Industrial decline — A general decline in industrial activities and productivity results in structural unemployment. For example, in the US, the manufacturing industry has declined over the last few decades. The sector is being replaced by information and service economies. Unfortunately, the skills needed in the manufacturing economy do not fit in these emerging sectors. As a result, many people previously employed in the manufacturing industry are losing their jobs.
  • Competition — Another factor that causes structural unemployment is competition. One of the driving forces of competition in the modern dynamic economy is globalization. Globalization is the increased interaction between people, countries, governments, and multinational organizations, making the world a "global village." This phenomenon allows developed countries to source cheap labor from developing countries. Alternatively, companies relocate their manufacturing facilities from developed to developing countries to cut costs. Consequently, many workers from developed countries lose their jobs, contributing to structural unemployment.
  • Technological changes — One of the primary causes of structural unemployment is technological advances. As technology improves, existing jobs become obsolete. Technology also leads to automation, a process by which machines and computers replace people. For example, many employees in the medical sector are losing their jobs to automated robotic arms. Moreover, technological advances allow companies to increase productivity. As a result, they can reduce the labor force without compromising their output.


Automated robotic arms are replacing medical professionals in the medical sector

An automated robotic arm programmed to handle medical operations


Policies to Reduce Structural Unemployment

Like any other form of unemployment, structural unemployment can have damaging economic implications. As such, governments and policymakers must develop and implement effective policies to reduce structural unemployment. Some of the policies that may prove beneficial are;

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Frequently Asked Questions

What is structural unemployment and why does it occur?

Structural unemployment occurs as a result of structural economic changes. technological changes and industrial decline result in a mismatch between peoples' skills and requirements in emerging industries.

What is the difference between structural and frictional unemployment?

Frictional unemployment emerges when people shift from one job to another. On the other hand, structural unemployment is caused by structural changes in the economy, such as technological advances.

What are some examples of structural unemployment?

Structural unemployment results from structural changes in the economy. One example is when robotic arms programmed to conduct surgeries render surgeons structurally unemployed. Another example is self-driving cars that make driving skills obsolete.

What is considered structural unemployment?

When companies install new technology resulting in job losses for several employees, it is considered structural unemployment. Industrial decline also contributes to structural unemployment.

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