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What Is Structural Unemployment?

Structural unemployment refers to an imbalance between the available jobs in the market and the skills levels of the currently unemployed. Unlike cyclical unemployment, structural unemployment is caused by beyond the company cycle’s impacts. It takes place when there is an underlying structural change in the economy that makes it difficult for some individuals to get jobs. It’s harder to adjust to being out of a job than other forms of unemployment. Even when you are aware of the obstacles in getting back to work, it can still be a challenge.

Why is structural unemployment more likely to occur now and in the U.S.? This kind of unemployment comes from structural changes in the economy, especially when it comes to the kinds of jobs available. The U.S. has always been a country that has welcomed new technologies and foreign goods into its markets. These advances in industry typically create more jobs. These also tend to make industries more competitive and thus create more job opportunities.

However, new technology or foreign goods aren’t always created equally. Some sectors create more jobs than others. For example, while computer technology is growing tremendously in the U.S., China and India are investing heavily in high-end manufacturing. Because the manufacturing sector accounts for a large portion of the U.S. economy, structural unemployment caused by a shift in technological investment has the potential to cause serious economic problems, particularly if the U.S. doesn’t make its investments in its own industry.

This is just one reason structural unemployment tends to be concentrated in certain areas of the economy. Another is the tendency for workers to be concentrated in areas where they are employed by the same company. A business that provides office space, equipment, computers, etc. to a business whose products are not produced in the same country will have workers who are permanent, and therefore will not be affected by the global recession. Likewise, businesses that are based in one geographic area will have workers who are in temporary positions, and therefore will not be impacted by the global business cycle or the state of the national economy.

Structural unemployment is often cited as a symptom of a problem within an industry, or as the result of a mismatch of skills between workers in different industries. While this can be true in some industries (one example is software development, which many people believe needs the best computer skills possible), it is not usually the case. One of the most common causes of structural unemployment is technological mismatch. Computer programmers may find they are competing with IT professionals from India, or with freelancers on the Internet, for the same position. While companies may not desire a programmer who speaks only English, they likely do not wish to hire someone with no technical skills at all.

Another cause of structural unemployment is a loss of new technologies, or innovations. Innovation is important to modern economies, because new technologies make things cheaper, faster, and stronger. Because so many technological industries have been shut down in recent years, there is a gap in skills between those workers who are receiving traditional unemployment benefits and those who are searching for new jobs. This gap in skills makes the job market a lot more difficult to find, leading to higher unemployment rates for both those who are looking for jobs, and those who have them.

Globalization has also led to structural unemployment caused by changes in the distribution of income and employment. This means that jobs in developed countries are generally cheaper and available to workers in developing countries. This process has had serious consequences in the United States for the white collar jobs that pay the highest wages. These jobs, like computer science and engineering, have helped lift the fortunes of many working-class families over the past few decades but have been threatened by rising competition due to the rise of Asian labor. The rising cost of labor in the U.S. has forced many blue-collar workers to move abroad, which has left them with lower salaries. This type of globalization has been bad news for consumers, because the goods they buy have become more expensive due to the increased prices of materials necessary to make those products.

Structural unemployment is not the only thing to worry about in this economy. Frictional unemployment, or the effects of changing spending habits among consumers as their income decreases, is another major concern. The rapid changes in spending habits caused by the downturn can be overwhelming to businesses and have caused many to either go out of business or suffer severe financial setbacks. If the effects of structural unemployment and frictional unemployment are not taken care of soon, the effects on an economy could be severe enough to bring about a major crisis.