Structural Unemployment: Causes, Examples and More

Unemployment comes in various forms. Follow along for the definition, causes, and examples of structural unemployment.

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By Entrepreneur Staff

Unemployment has many shapes, forms, and causes. The pandemic and its aftermath created macroeconomic shifts in the job market. While some had more opportunities for work than before, the U.S., at large, experienced high unemployment and joblessness.

So where does structural unemployment fall on that spectrum — and what is it, really?

Read on for more about:

  • Definition and examples of structural unemployment
  • Causes of structural unemployment
  • Ways to protect yourself from structural unemployment

What is structural unemployment?

Structural unemployment is a long-term unemployment state in which significant shifts and structural changes to an industry cause specific jobs and skill sets to become obsolete.

Structural unemployment often lasts for a long time because of an employee skill mismatch that no longer translates to other industries.

Often, structural unemployment can be nerve-wracking because as the demand for that skill set dwindles, that specific job market becomes harder to find and more competitive.

Structural unemployment vs. other types of unemployment

While structural unemployment is a long-lasting state, other types of unemployment have alternative characteristics. To better distinguish structural unemployment's features, look at a few different kinds of unemployment below.

Cyclical unemployment

Cyclical unemployment is the number of unemployed workers during a specific business cycle. The country's strengths, weaknesses, and aggregate demand for goods and services are the factors that determine the gross domestic product.

Those trends indicate each cycle of economic growth and failure. When the GDP experiences a significant fall, job vacancies become scarce, and layoffs begin to spike. Cyclical unemployment is never good news for an economy.

Generally, it causes government policymakers to step in with a stimulus package or the Federal Reserve to shift fiscal policy to boost the economy.

Frictional unemployment

This type of employment occurs when a worker leaves a job by choice. This can be when an employee voluntarily leaves their position and is unemployed between positions or the gap recent graduates often experience before finding their first job.

Frictional unemployment can often signify a healthy economy, as workers are financially stable enough to support themselves as they transition from one job to another.

Natural unemployment

Natural unemployment is a sign that inflation is coming. It combines the features of structural and frictional unemployment and indicates that the costs of goods and services in an economy are about to rise.

Related: Everything We Know About Unemployment Benefits During the Coronavirus Pandemic

Causes and examples of structural unemployment

1. Technology

The business world has always been about efficiency. With technological changes, automation is moving faster than ever. While these technological advances are significant for some, for others, it means their specialized workers' skills can be replaced by machine labor.

For example, when you go to the grocery store, you've likely seen the self-checkout section. While some people find self-checkout more convenient, it has caused the demand for cashiers to decrease.

The lack of demand has caused layoffs and a finite amount of jobs, leaving former cashiers to seek alternate positions and possibly other industries for which they must learn new skills.

The industries that feel the most effects from structural unemployment are:

  • Manufacturing
  • Agriculture
  • Trade

2. Lack of or slowed education

One of the most important questions a person can ask in a job interview is, "What are the opportunities for growth in this position?"

Unfortunately, some companies do not or cannot offer growth opportunities, meaning that employees might not learn new business practices or adapt to new technologies in their industry.

This causes structural unemployment because employees who do not have the platform to grow eventually become obsolete.

For example, a manufacturing plant obtains new machinery to make its process more efficient. While these machines still require a human operator, the company does not provide training for its employees.

Instead of spending time training its employees, the company hires new employees from a younger or more educated demographic who already know how to operate the new machinery — causing structural unemployment for those who lost their manufacturing jobs.

Related: Interviews Are a 2-Way Street: How to Make the Most of Them for Mutual Success

3. Relocation of a company

When a company decides to relocate or is mandated to do so by changes to government policy, it can leave employees without work if there are no job opportunities for their skills in the area.

For instance, imagine a struggling small town that loses public funding for its library. Because the library may close, the local librarians with very specialized skill sets could find themselves out of work.

Discouraged workers might now need to make a commute or learn entirely new skills to break out of structural unemployment.

4. Economic changes

The economy is subject to trends, so industries that flourish because of specific fads often also see adverse effects. Retail, hospitality, and food industries are subject to changing trends and must stay ahead of the curve to avoid structural unemployment.

About 10 years ago, you couldn't drive more than five blocks in a city without seeing a frozen yogurt shop. They were on every corner, in every strip mall, and all over social media. These days, the frozen yogurt trend has thawed, many shops have closed, and employees have found themselves looking for a new places to work.

5. Competition

The fight to get to the top is a fierce one. Companies do what they have to as globalization progresses. Part of this process means outsourcing to a cheaper labor market to boost profits.

While outsourcing might provide incentives for companies and those with new outsourced jobs, it leaves many employees facing structural unemployment.

Related: Your Time is Money, Start Saving It By Outsourcing

How to protect yourself from structural unemployment

The U.S. Bureau of Labor Statistics reports that the current number of people unemployed is 3.7 percent, or six million people. To avoid becoming a part of the unemployment rate, look below for some strategies to protect yourself from structural unemployment.

1. Education

Whether it's the education you pursue or professional development opportunities provided by your employer, always take advantage of new training and certifications to stay as informed as possible.

Employers might notice that you are taking an extra step to improve your skills, and you can make yourself a more valuable asset in the process.

2. Research

The job market is constantly changing, especially as technology continues to advance. Understanding your industry and where it's going based on its history, trends, and advice from economists can help you stay ahead of the curve.

Stay informed on current statistics, as well as jobs of the future, so you can base your education and training on valuable skills you need to stay relevant.

Related: The Future of Telemedicine in the Health Care Industry

What structural unemployment means for you

As the pandemic, technology, and other trends continue to shift the labor force, keep an eye out for how you can leverage your skills in your current position and continue your education for new jobs of the future.

For more most-have information on the world and U.S. economy, finance, and the state of the workforce, visit Entrepreneur today.

Entrepreneur Staff

Entrepreneur Staff

Editor

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