When there is new technology being made, a decline in consumer demand, and even a lack of education, part of an economy's workforce will not be sufficient enough to work certain jobs. Consequentially, the term structural unemployment comes up. Essentially, we want to know what structural unemployment is, how it affects workers in an economy, and why it happens. Let's take a look.
Structural unemployment is a type of long-term unemployment that occurs when there is a mismatch between the skills workers possess and the skills needed for available jobs.
Unlike cyclical unemployment, which is caused by downturns in the economy, structural unemployment is driven by shifts in industries, technological advancements, or changes in the geographic locations of jobs. These changes leave some workers without the necessary skills or in the wrong place to find employment.
But what causes structural unemployment in our economy?
First, technological advancements such as further automation and artificial intelligence (AI) have replaced jobs that once required manual labor. Workers in manufacturing, for instance, may find themselves unemployed as robots and machines take over assembly lines. If these workers lack the skills to transition to new roles, they may experience prolonged periods of unemployment.
Further, with globalization, many companies move their production facilities to countries where labor costs are lower. This relocation can lead to job losses in the original country, leaving workers struggling to find employment without relocating or acquiring new skills.
Structural unemployment can also result from shifts in consumer demand. For example, the decline in demand for coal due to the rise of renewable energy has led to unemployment in coal mining regions, as those workers’ skills are no longer in high demand.
And finally, as industries evolve, certain skills become obsolete. For example, typists and switchboard operators were once essential workers, but the rise of computers and digital communication has made these jobs redundant. Workers who cannot quickly retrain or upskill often face structural unemployment. This is a less common reason for structural unemployment; nonetheless, it is important to understand when determining why this phenomenon occurs.
The impact of structural unemployment on the workforce
Structural unemployment often leads to long-term unemployment, where workers remain jobless for extended periods due to the significant time required to retrain or relocate. Further, this can exacerbate income inequality, as workers in declining industries face difficulty transitioning to higher-paying, in-demand fields. This disparity often leaves certain groups marginalized and unable to reap the benefits of economic growth. And regions that rely heavily on specific industries, such as manufacturing towns, may experience a sharp decline in employment opportunities. This can lead to a range of social issues, including increased poverty, crime rates, and a reduction in community cohesion.
Can this phenomenon be avoided?
Although we cannot stop structural unemployment from occurring, there are a few ways in which we can combat its effects on our workforce and economy.
To combat structural unemployment, governments and organizations often invest in reskilling and upskilling programs. These initiatives help workers acquire the skills necessary to transition into industries where jobs are growing, such as technology, healthcare, and renewable energy.
Additionally, the encouraging of workers to move to regions where jobs are available can also help reduce structural unemployment. However, this solution is often limited by housing costs, personal circumstances, and the availability of social support networks.
Governments can also support economic diversification by promoting and incentivizing innovation in industries that are likely to grow. Promoting entrepreneurship and encouraging the development of new sectors can create a more dynamic economy with a broader range of job opportunities. But too much automation can also hurt job opportunities for all.
The bottom line
We cannot take structural unemployment away from our job economy. Unfortunately, it is a natural stage in the economy that we take part in. However, we can do things to combat this issue. Furthermore, we can understand why structural unemployment occurs and how it affects the workforce and the economy. As our economy continues to grow, structural unemployment will stay a heavy topic that affects us.
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