What Is Structural Unemployment and What Causes It?

Key takeaways

Structural unemployment occurs when the balance between available jobs and the number of people with the necessary skills to fill them is uneven.

• Four potential causes of structural unemployment include technological advancements, companies relocating, economic shifts, and a lack of training.

• Technological advances or companies that choose to move overseas for lower production costs can cause structural unemployment, which is especially prevalent in the manufacturing, agriculture, and trade industries.

• You can prepare for instances of structural unemployment by pursuing regular professional development opportunities, which can help your skill set remain current.

Explore what structural unemployment is, what causes it, and how it compares to other forms of unemployment. If you’re ready to develop your skills in a field connected to studying structural unemployment, enroll in the Google Data Analytics Professional Certificate, where in as little as six months, you can learn about data visualization, data storytelling, Tableau software, and more.

What is structural unemployment?

Unlike other types of unemployment, structural unemployment isn’t a result of a lack of job availability or openings. Instead, while you can find open positions, you’ll experience a lack of individuals with the skills to fill those roles. It can take years for people in the job market to acquire the required skills employers seek, making structural unemployment an issue that drags on for an extended period. It can take decades for structural unemployment to improve.

However, a lack of skills and training isn’t the only contributing factor to structural unemployment. Other factors, such as globalization, technological progression, and government policies, play a significant role in causing the disparity.

Implementing structural unemployment solutions is challenging due to the specific factors and large-scale causes of structural unemployment. While structural unemployment can contribute to the overall unemployment rate across the country, this particular type of unemployment can still exist even as recessions end and market conditions improve.

What is a structural unemployment example in real life?

A real-life example of structural unemployment occurs when a grocery store chain replaces its cashiers with electronic, self-checkout stations. In this scenario, the industry produces an excess of workers with the cashier skill set but not enough jobs for them to fill, creating structural unemployment.

What are the causes of structural unemployment?

Structural unemployment results from a need for more people with the necessary skills to do certain jobs. But what causes the gaps seen between job openings and qualified workers? The following expounds on some of the primary causes of structural unemployment:

• Advancements in technology: When new technology comes about, it can change the responsibilities of some jobs, making new skills essential while eliminating the need for others. For example, in manufacturing, machines can replace the need for humans. To have relevant skills, employees must receive training to develop new skills to operate new technologies.

• Relocation: Companies may relocate their facilities to areas that offer opportunities for cheaper labor to reduce costs. When companies move, it can leave many people without work. These people then need to leave to find employment or gain new skills to transition to another field of work. This gap can cause structural unemployment within a community.

• Economic shifts: Certain industries are more prone to economic effects as trends change and consumer preferences evolve. For example, when you have a job that depends on trends or consistent product sales, a decrease in demand for that product can impact the necessity of your role and your job security. This scenario often occurs in industries such as retail and food services.

Read more: 16 Business Trends: How to Stay Ahead

• Lack of training and education: When companies fail to provide internal training and development for their employees to continue gaining new skills, they may eventually find their skills no longer relevant to the modern work environment. This schism can cause structural unemployment since these employees must update their skills and learn new business practices or technology to attain a new position in their industry.

Structural unemployment by industry

Some industries are more likely to experience structural unemployment. For example, industries experiencing technological advances or companies that choose to move overseas for cheaper production costs can cause structural unemployment. 

Three industries that tend to have challenges with structural unemployment include manufacturing, agriculture, and trade. The manufacturing and agriculture industries constantly change as new machinery becomes available, meaning that some might lose their positions as their jobs become less dependent on skilled laborers. On the other hand, the trade industry suffers from structural unemployment due to the impact of government regulations and public policy.

Structural unemployment vs. other types of unemployment

Structural unemployment is just one of many types of unemployment. Here’s how it compares to other common types of unemployment. 

Cyclical unemployment

Cyclical unemployment is derived from economies’ business cycles' direct impact on employment levels. When the economy is thriving, cyclical unemployment is low. However, when a recession hits, cyclical unemployment is high due to decreases in demand and production. 

Unlike structural unemployment, a disparity in qualified workers and job openings doesn’t exist. Instead, cyclical unemployment occurs when companies lay off employees to protect profit margins as people spend less money during recessions. To limit the consequences of cyclical unemployment, the government may introduce policies to encourage spending, such as lowering interest rates.

Cyclical and structural unemployment are similar, though, in that they are both involuntary and dependent on external factors, such as the scope of the economy. In the long term, a cyclical unemployment situation can become structural if a company phases out jobs, as when a manufacturer lays off factory workers and eventually replaces them with machines. 

Frictional unemployment

Frictional unemployment occurs when employees leave their jobs to find new positions elsewhere. Moving to a new city, choosing a new career path that better aligns with your interests, or pursuing a college education are all causes of frictional unemployment.

Frictional unemployment varies from structural unemployment because it is a form of voluntary unemployment, and it typically isn’t a sign of a struggling economy. Frictional unemployment can mean the opposite, since a thriving economy means an employee has less risk when voluntarily leaving a job. 

Seasonal unemployment

Seasonal unemployment occurs when the demand for certain positions no longer exists at the end of a season. Unlike structural unemployment, seasonal unemployment is usually predictable. For example, businesses like summer camps, ski resorts, and tourism are seasonal, so some employees can only work during the months of operation. 

Seasonal employment opportunities are great for building your resume, and with a good performance, you may earn a full-time job offer. For students, seasonal employment is also a way to earn money between semesters or during the holidays to gain valuable experience. 

Classical unemployment

Classical unemployment occurs when wages are high, and the cost of employing an entire workforce is too high for a business to handle. It is sometimes known as real-wage unemployment. Causes of unaffordable wages include government-mandated minimum wage increases and union negotiations that result in higher salaries. Classical unemployment differs from structural unemployment because the employees qualify and have the necessary skills to do the job. Still, it becomes too expensive for the business to employ an entire staff.

Tips to overcome structural unemployment

You can mitigate the potential of structural unemployment by pursuing regular professional development to stay up-to-date with valuable skills that can qualify you for career advancements. For example, certifications and professional development opportunities can help you gain transferable skills. You can also perform research to identify changes in industry trends that may impact what positions may become obsolete and what skills will be in high demand.

Keep up with tips and trends in the business world

Subscribe to our weekly LinkedIn newsletter, Career Chat, for industry updates, tips, and trends. Then, explore free, business-related resources to optimize your professional growth:

• Watch on YouTube: 3 AI Tools Small Businesses Are Using to Save 10+ Hours a Week

• Enhance your skill set: Fastest-Growing Skills for Professional Success

• Explore career paths: 4 In-Demand Career Paths (and Skills) to Know

With Coursera Plus, you can learn and earn credentials at your own pace from over 350 leading companies and universities. With a monthly or annual subscription, you’ll gain access to over 10,000 programs—just check the course page to confirm your selection is included.

Build job-ready skills with Coursera Plus

Start 7-day free trial

• 
• 
• 
• 

Start 7-day free trial