Structural Unemployment
1. The Main Causes of Structural Change
Structural unemployment doesn't happen overnight. It is a slow but powerful force. Let's look at three major reasons why the structure of an economy can change.
Technological Advances
This is the most common cause. New machines, software, or robots can do jobs that people used to do. For example, a factory that builds cars might install robot arms that can weld and paint perfectly. The workers who used to do those jobs are now unemployed. Their specific skill (manual welding) is no longer needed. They might need to learn new skills, like how to program the robots, to get a job again.
Changes in Consumer Demand
What people want to buy changes over time. As societies become more aware of health, people might stop buying sugary sodas and start drinking more bottled water. Soda factories may close, putting workers out of a job. The jobs in soda production don't just disappear; the whole industry shrinks. The workers' skills in making soda aren't useful for making bottled water, which is a different process.
Globalization and Competition
Sometimes, it's cheaper for companies to produce goods in other countries. A clothing company might close its factory in the United States and open one in another country where labor is less expensive. The sewing machine operators in the U.S. lose their jobs. Their skills are still valuable, but the job has physically moved to a different part of the world. This creates a structural mismatch in their local economy.
2. Real-World Examples You Can Relate To
Let's make this idea concrete with two clear examples that show structural unemployment in action.
Example 1: The Rise of Digital Photography
Remember film cameras? Companies like Kodak employed thousands of people to manufacture film rolls and photo paper. When digital cameras and smartphones became popular, almost everyone stopped using film. The workers who had spent years perfecting the process of making film found their skills were no longer needed. The economy's structure shifted from film to digital, and these workers faced structural unemployment. They had to train for completely new careers, like working in tech support or healthcare.
Example 2: The Decline of Coal Mining
For many decades, coal was the main source of energy for electricity. Many towns were built around coal mines. As the world worries more about climate change and as the price of solar and wind energy drops, power plants are switching away from coal. Coal miners, who have a very specific skill set, lose their jobs. The jobs aren't coming back. The energy structure of the economy has changed. To find new work, these miners might need to learn how to install solar panels or work in renewable energy, a field that requires different knowledge.
3. How It Differs From Other Unemployment
It helps to see structural unemployment side-by-side with its cousins. The table below breaks down the differences.
| Type of Unemployment | Main Cause | Is it Permanent? | Simple Example |
|---|---|---|---|
| Structural | Change in economy (tech, demand) | Yes, unless workers retrain | A buggy whip maker after cars were invented |
| Frictional | Time between jobs / graduating | No, it's temporary | A teacher moving to a new city and looking for a job |
| Cyclical | Economic recession (low demand) | No, it returns when economy recovers | Construction workers laid off during a housing market crash |
4. Important Questions About Structural Unemployment
A: It's difficult, but possible. Governments can't force companies to keep old technologies. However, they can help workers by funding retraining programs. For example, if coal miners are unemployed, the government might pay for them to take classes in computer programming or solar panel installation. This helps workers' skills match the new structure of the economy.
A: History shows that while technology eliminates some jobs, it also creates new ones we never imagined. 100 years ago, nobody had a job as an app developer or a drone pilot. However, the transition is hard for the workers whose jobs are lost. They need to learn new skills to move into the newly created roles. This is called the skills gap.
A: For the individual worker, yes, it can be very stressful. But for the economy as a whole, it is often a sign of progress and innovation. When the economy shifts away from old industries (like making film) and toward new ones (like creating digital software), it usually means we are producing things more efficiently or inventing exciting new products that improve our lives. The challenge is to help the workers caught in the middle.
5. Conclusion
Footnote: Terms Explained
- [1] Skills Gap: The difference between the skills that employers need and the skills that workers actually have. This is a key feature of structural unemployment.
- [2] Globalization: The process by which businesses or other organizations develop international influence or start operating on an international scale.
- [3] Cyclical Unemployment: Unemployment that results from economic downturns (recessions) and is directly related to the macro-economic health of the country.
- [4] Frictional Unemployment: Short-term unemployment that arises from the process of matching workers with jobs (e.g., recent graduates looking for their first job).
- [5] Retraining Programs: Courses or classes designed to teach new job skills to workers whose previous skills are no longer in demand.