Structural Unemployment
What is Structural Unemployment?
Structural unemployment is long-term unemployment that occurs when workers' skills do not match the jobs available.
Structural unemployment happens when there is a mismatch between the skills of the unemployed and the requirements of the available jobs. This can be caused by technological changes, shifts in consumer demand, or the relocation of industries. Structural unemployment often requires workers to retrain or relocate to find new jobs.
Structural Unemployment: a worked example
A town's auto parts plant automates its line and lays off 800 assembly workers. Over the following year local employers post roughly 800 openings in healthcare support, medical coding and equipment maintenance, nearly all of them requiring a certificate the laid-off assemblers do not hold. Unemployment in the town stays high even though openings and jobless workers are close to equal in number, which is what marks this as structural rather than a shortage of jobs. The count falls only as workers finish retraining or move to where their existing skills are still in demand.
The mistake students make with structural unemployment
Students treat structural unemployment as proof that the economy is short of jobs and assume government stimulus will fix it. Structural unemployment can persist while job openings sit unfilled, because the barrier is a mismatch of skills, credentials or location rather than weak total spending, so the remedies are retraining, education and relocation assistance rather than expansionary fiscal or monetary policy.
Structural Unemployment questions
What causes structural unemployment?
Structural unemployment is caused by a lasting mismatch between the skills or location of workers and the requirements of the jobs that are available, usually arising from automation, technological change, shifts in consumer demand, or industries relocating. Wage rigidities such as a binding minimum wage, union contracts or efficiency wages can also create it by holding the wage above the market clearing level.
What is an example of structural unemployment?
A bank teller who loses their job as customers shift to ATMs and mobile banking apps is structurally unemployed, because those teller positions have disappeared rather than paused and the openings that remain call for different skills. Returning to work usually requires new training rather than simply waiting for the economy to improve.
Is structural unemployment permanent?
Structural unemployment usually ends only after workers gain new skills, earn new credentials or move to where the jobs are, which is why it lasts far longer than frictional unemployment without being permanent for the economy as a whole. It is part of the natural rate of unemployment, so some structural unemployment remains even when the economy is at full employment.
Related terms
Common comparisons
Get AP Econ exam tips in your inbox
Occasional emails with study tips, new interactive graphs, and exam-season reminders. Free, no spam.
No spam. Unsubscribe anytime. Read our privacy policy.
Keep track of what you have studied
A free EconLearn account adds progress tracking, your quiz history, and achievements. Studying here is free either way, and there is nothing to pay for as a student.
Create a free accountAlready have one? Sign in
Last updated