Structural Unemployment Definition
Structural unemployment is caused when there is a disparity between the knowledge and skills that are demanded by the employer and that which are offered by his or her employees and it is usually generated as a result of several changes like recession, deindustrialization, etc in the economy and in such a situation individuals are unable to source work on account of different skills requirements.
Structural unemployment is a mismatch that occurs between the skill that is offered by the workers in the economy and the skills that are demanded by the employers from the workers. The main reason for this type of unemployment is the technological changes in the market that results in making the skills of many job laborers obsolete. For example, a large number of lucrative manufacturing jobs in the United States were lost over the last 30 years as the jobs related to production have migrated to the areas requiring low cost in China and others.
Let’s consider the following examples of structural unemployment to have a better understanding.
Example #1 – Industry Shifts
Mr. Gorge was a manufacturing expert. He used to manage the shop floor since he was 19 years old. Afterward because of the new economy manufacturing jobs started shifting from the US to China. As a result, the current employer asked Mr. Gorge to leave the organization with a severance package. After leaving the job Mr. Gorge couldn’t find any job matching his skills. Somehow he could find a job of sales manager which offered him very little pay and a lower post as compared to his earlier post.
Example #2 – Seasonal Unemployment
A worker named Mr. Eden was doing manual labor work in the mango field for years which gives him employment for only 4 months in the year. So he has to manage his earnings by working in a commercial complex as the security guard.
Example #3 – Technology obsolescence
Mr. Dhal has the experience of writing algorithms in a specific computer language. We all know that technology is a quickly changing field because of which the language has become obsolete. As a result, language has become obsolete and the experience of Mr. Dhal is of no use 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 himself in the job relating soft skills training as the job pertaining to his expertise was found nowhere.
Top Causes of Structural Unemployment
The main reason for structural unemployment is the mismatch of skills of workers with that of the jobs available. The causes of structural unemployment mismatch of skills are as follows:
#1 – Geographic
In various cases, there are places where the job skills of the worker match with the jobs available but these places can be far away from the worker’s geographical region and the workers are not ready to relocate to such places.
#2 – Macro-Economic Changes
These issues are faced by older workers. They have worked in a certain skill with perfection but all of sudden the jobs related to that particular skill are found nowhere and their skills have become obsolete. Let’s take the example of Dubai which used to be an oil-rich company. However, in today’s scenario, it becomes an economy depends more on tourism and logistics. Therefore, all the workers who had expertise in oil drilling are jobless and there is a shortage of workforce professionals and the staff in the hotel.
#3 – Wage Related
Wage Related is one of the causes of structural unemployment where workers in many cases do not accept the job because of the package they offer is very less. The reason for such low packages is an abundance of labor which is easily available at a cheap price.
Cure for Structural Unemployment
The cure for structural unemployment can be:
1 – Efficient Training of Workforce
States should take the responsibility of recognizing the changes that are needed to be made in the economy and should create the training programs to train the workforce and update them with the technological and other changes. As the cost of the training program cannot be affordable by some workers so government should try to provide such training programs at free of cost and must facilitate the placement of jobs after the completion of training programs.
2 – Breaking the Barriers Related Geography
With the development of information technology, it is easier to break the 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 it has. When there is no work for the huge percentage of workers then it shows that the high amount of workforce that can be used for the production is going unused. Only the economies that are efficient can use the workforce to its maximum.
#2 – Support Costs
Another disadvantage of structural unemployment is the cost that the country has to spend while supporting the workers who are unemployed at a given point in time. Although some countries do not spend anything to support the unemployed there are also countries that provide benefits in cash or kind to the unemployed workforce.
#3 – Instability
Structural unemployment also increases instability in the country. Although in some modern economies the structural unemployment at a lower level is considered to be necessary there can be unrest when the level reaches its peak. All the job seekers want to get employed to earn money but if they fail to get the job they may cause violence or may push the government to get changed.
#4 – Crime
It is obvious that unemployment and crime are correlated. In the 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 in spending in the production of goods and services.
Structural Unemployment arises due to the mismatch of workers’ skills and the jobs available in the market. Due to Structural unemployment, some group of workers finds difficult to get the job in the economy as nowadays production and manufacturing has shifted to machine-oriented jobs which kills the need of human resource in the organization. But the duration of this unemployment is generally of medium term.
Structural unemployment takes generally one to two years to get resolved or sometimes slightly higher time. Training programs should be conducted to get the workers updated with the jobs available so that the problem of structural unemployment can be resolved timely.
This has been a guide to what is Structural Unemployment and its definition. Here we discuss the root causes and cure of Structural Unemployment along with examples and disadvantages. You may learn more about financing from the following articles –