What is Structural Unemployment?

Structural unemployment is a category of unemployment arising from the mismatch between the jobs available in the market and the skills of the available workers in the market.

How Does Structural Unemployment Work?

Structurally unemployed people usually have skills that are not needed in the market or have a specialized background or experience that cannot be used in the current market. It is usually the result of a change in the economic situation of an industry or region, often a natural disaster or the introduction of a new competitor or market.

Natural disasters, such as hurricanes, have wiped out entire industries in geographic regions leaving the workforce structurally unemployed.

Why Does Structural Unemployment Matter?

Structural unemployment is often considered permanent as it is difficult for many workers to learn a new skill set or move to an area where such skills are still in demand. Government policies and programs can be put in place to prevent such unemployment sometimes; however, stimulus-driven policies (i.e. activities to increase the level of business activity) do not typically eliminate or lessen structural unemployment – the market simply can't utilize the skills anymore.

Structural unemployment is the most common form of unemployment.

Removing such jobs from the market means that new jobs needing different skills are opening up.

Other categories of unemployed recognized by economists include cyclical and frictional unemployment.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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