Question

What is structural unemployment? Give examples of structural unemployment.

Short answer

Structural unemployment occurs when there is a mismatch between workers' skills and the skills required for available jobs, due to factors such as technological advancements, changes in consumer demand, or shifts in the economy. Examples of structural unemployment include: (1) the decreased demand for human labor in manufacturing due to automation and robots; (2) the decline in job opportunities for retail workers in brick-and-mortar stores due to the growth of e-commerce; and (3) the reduced demand for coal miners as a result of the decline in the coal industry.

Step-by-step solution

Define Structural Unemployment

Structural unemployment occurs when there is a mismatch between the skills held by workers and the skills required for the available job positions. This type of unemployment results from long-lasting changes in the economy, such as advances in technology or changes in consumer preferences.

Reasons for Structural Unemployment

There are several reasons that structural unemployment might occur: 1. Technological advancements: As technology progresses, the job market evolves as well. Jobs in certain industries may become automated or obsolete, leading to a decline in demand for workers with those specific skills. 2. Changes in consumer demand: If consumer preferences shift, demand for certain products or services may decrease, leading to a decrease in job opportunities in those industries. 3. Shifts in the economy: Changes in the overall economy may lead to a decline in job opportunities in specific industries.

Example 1: Technological Advancements

As technology advances, automation has become more prevalent in various industries. In manufacturing, for example, automation and the use of robots on assembly lines has significantly reduced the demand for human labor. Workers who previously relied on these assembly-line jobs may now find themselves structurally unemployed if they do not have the skills to transition into different positions.

Example 2: Changes in Consumer Demand

Changes in consumer preferences can also lead to structural unemployment. For example, the growth of e-commerce has led to a decline in the demand for retail workers in brick-and-mortar stores. Some workers may be able to transition into jobs in e-commerce, but those who do not possess the necessary skills or qualifications might find themselves structurally unemployed.

Example 3: Shifts in the Economy

Shifts in the overall economy can also contribute to structural unemployment. For instance, the decline of the coal industry in recent years has resulted in a reduced demand for coal miners. As the industry continues to decline, workers who previously held jobs as coal miners might find themselves structurally unemployed if they cannot transition into other industries or occupations.

Key concepts

Mismatch of Skills and Jobs

One of the critical facets of structural unemployment is the mismatch between the skills workers possess and the skills needed for available jobs. This mismatch could be due to several factors, including an educational system that does not adapt to the changing demands of the labor market or industries evolving faster than the workforce can retrain.

For example, imagine a town with an industry centered around typewriter manufacturing. As computers became the norm, demand for typewriters plummeted. Workers skilled in the assembling of typewriters found their skills outdated and thus faced structural unemployment. Re-skilling or up-skilling becomes crucial in such scenarios, where the workforce must adapt to the new demands or face long-term joblessness.

Technological Advancements

Technological advancements shape our world, but they can also lead to significant shifts in employment. As new technologies are developed, certain jobs can be automated or become obsolete. This not only changes the nature of work but also demands a workforce that is skilled in new and evolving technologies.

The introduction of ATMs, for instance, reduced the need for bank tellers, as many banking tasks became automated. The assembly lines once populated by human workers are now increasingly automated with robotics. Those who cannot find their place in this new landscape without additional training are examples of people impacted by the kind of structural unemployment driven by technological change.

Changes in Consumer Demand

Consumer preferences are not static; they change over time and can be influenced by trends, technology, and societal shifts, leading to structural changes in the job market. One of the most recent examples of this is the severe decline in demand for workers in brick-and-mortar retail stores due to the rise of online shopping platforms.

As consumers increasingly prefer to shop online, retailers are closing their physical stores, and the need for sales clerks and store managers is diminishing. Transitioning from in-store sales to digital marketing or e-commerce logistics is not always straightforward, highlighting how changes in consumer demand contribute to structural unemployment.

Economic Shifts

Economic shifts can realign or even disrupt industries, leading to structural unemployment. These shifts may be sparked by policy changes, global economic trends, or a range of other factors. A relevant example is the transition from fossil fuels to renewable energy sources. As countries pivot towards greener energy, jobs in traditional sectors like coal mining decrease.

Economic shifts require workers to adapt or face prolonged periods of unemployment. For coal miners, the transition might involve retraining for roles in sustainable energy sectors, such as wind or solar power. This process, while beneficial for the economy's long-term health, presents immediate challenges to those whose livelihoods are transformed by such economic shifts.