Loading the player...

What is 'Structural Unemployment'

Structural unemployment is a longer-lasting form of unemployment caused by fundamental shifts in an economy and exacerbated by extraneous factors such as technology, competition and government policy. Reasons why structural unemployment occurs include workers' lack of requisite job skills or that workers live too far from regions where jobs are available and cannot move closer. Jobs are available, but there is a serious mismatch between what companies need and what workers can offer.

BREAKING DOWN 'Structural Unemployment'

Structural unemployment is caused by forces other than the business cycle. This means that structural unemployment can last for decades and may need radical change to redress the situation. If structural unemployment is not addressed, it can increase the unemployment rate long after a recession is over and can increase the natural rate of unemployment.

For example, hundreds of thousands of well-paying manufacturing jobs have been lost in the United States over the past three decades as production jobs have migrated to lower-cost areas in China and elsewhere. This decline in the number of jobs creates a higher natural rate of unemployment. Growing technology in all areas of life increases future structural unemployment, since workers without adequate skills will get marginalized. Even those with skills may face redundancy, given the high rate of technological obsolescence.

Examples of Structural Unemployment

While the 2007-2009 global recession caused cyclical unemployment, it also increased structural unemployment in the United States. As the jobless rate peaked over 10%, the average unemployment period for millions of workers rose significantly. These workers' skills deteriorated during this time of prolonged unemployment, causing structural unemployment. The depressed housing market also affected the job prospects of the unemployed, and therefore, increased structural unemployment. Relocating to a new job in another city would mean selling homes at a substantial loss, which not many were willing to do, creating a mismatch of skills and job availability.

France has been hit hard by structural unemployment. The country is facing a recession due to natural disasters and a strike movement that is halting economic recovery. Structural unemployment arises from the fact that a large portion of France's work force is participating in temporary second-level jobs with little chance of being promoted to long-term contracts, forcing them to strike. This results in a lack of job flexibility and little job mobility, sidelining many French workers who have not adapted to new tasks and skills. Labor unions and the French government are negotiating to help curb structural unemployment.

RELATED TERMS
  1. Unemployment

    Unemployment is the term for when a person who is actively seeking ...
  2. Full Employment

    Full employment is a situation in which all available labor resources ...
  3. Natural Unemployment

    The lowest rate of unemployment that an economy can sustain over ...
  4. Unemployment Insurance

    Unemployment insurance provides benefits to workers who meet ...
  5. Unemployment Compensation

    Unemployment compensation is paid by the state to unemployed ...
  6. Continuing Claims

    Continuing claims refers to unemployed workers that qualify for ...
Related Articles
  1. Insights

    The Cost of Unemployment to the Economy

    Unemployment carries many costs, both obvious and hidden, for an economy.
  2. Personal Finance

    Jobs with the Lowest Unemployment Rates

    These jobs have low unemployment rates and high demand – both now and likely in the future.
  3. Personal Finance

    Where Unemployment Hits Hardest

    A look at the demographics of unemployment, and what that means for workers around the nation.
  4. Insights

    Jobless Growth: Are You Prepared?

    Economic growth doesn't always mean employment growth. Learn about how the jobless growth economy affects workers and investors.
  5. Insights

    The True Unemployment Rate: U6 Vs. U3

    Learn how to distinguish between the U-3 and U-6 unemployment rates, and explore which rate provides a truer picture of unemployment.
  6. Personal Finance

    Careers in Crisis: Three Industries Hit Hardest By Job Losses

    The entire nation is suffering from unemployment headaches, but some industries are hurting worse than others.
  7. Personal Finance

    Why Global Unemployment Is Rising

    The ILO is reporting that there are now 50 million fewer jobs in the global economy than before 2008. Find out why.
  8. Insights

    A Review Of Past Recessions

    Here we look at the biggest economic declines in the U.S. since the Great Depression.
RELATED FAQS
  1. What is the difference between structural unemployment and cyclical unemployment?

    Learn more about about the differences between structural and cyclical unemployment and when cyclical unemployment becomes ... Read Answer >>
  2. How did the Great Recession affect structural unemployment?

    Structural unemployment is difficult to measure, but there are hints in the data that the spike in unemployment following ... Read Answer >>
  3. How does the U.S. Bureau of Labor Statistics calculate the unemployment rate published ...

    Understand the process used by the U.S. Bureau of Labor Statistics to determine the official unemployment rate for the United ... Read Answer >>
  4. Why does unemployment tend to rise during a recession?

    Learn what a recession is, some attributes of an economy in a recession, and why the unemployment rate tends to rise during ... Read Answer >>
  5. How can investors use trends in the unemployment rate to evaluate the outlook of ...

    Learn the effect of the unemployment rate on credit services companies, and why this is a key metric to consider when investing ... Read Answer >>
Hot Definitions
  1. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  2. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  3. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  4. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  5. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  6. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
Trading Center